Can we detect regional differences in econometric analyses of the Norwegian timber supply?

Abstract

Forestry and forest industries are important for regional income and employment in Norway as well as in most North European countries, but few studies exist about factors affecting the timber supply at regional level. The main objective of this study is to estimate aggregated regional timber supply elasticities for six regions in Norway. Thereby we also test for regional differences, focusing on wood prices, standing stock volume and interest rate as explanatory variables. We have used three different statistical models (fixed and random effects panel models and first difference models) on regional data from the Norwegian forest inventory on standing volume and official statistics on harvested volumes, interest rate and prices of sawlogs and pulpwood for the period 1996–2016. Statistically significant different price elasticities are found in 12 out of total 15 pairs of regions. The price elasticity was lower and the volume elasticity higher in the western region compared to the other regions. The first difference models are best with respect to specification tests. The use of region specific price elasticities gives slightly better fit for the panel data models than using a uniform price parameter. The results show that the econometric specification influence the parameter values, and it is thus complicated to directly compare results in different timber supply studies. Regional differences in timber supply are important to consider.