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Are Log Markets Competitive? Empirical Evidence and Implications for Canada-U.S. Trade in Softwood Lumber

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Author Info
Kurt Niquidet
G. Cornelis van Kooten

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Abstract

Under the U.S. Department of Commerce’s ‘changed circumstances’ review, it is possible that the countervail duty on Canadian lumber can be lowered if administered stumpage prices are based on transaction evidence appraisal – on actual auction data and regression analysis. The Province of British Columbia is implementing such a market-based approach to set stumpage fees, relying on timber auction data from the Small Business Forest Enterprise Program (SBFEP) and OLS regression. We employ SBFEP data to estimate a truncated regression model, comparing our estimates of stumpage fees with the OLS results. It turns out that the OLS approach is biased and likely results in overestimates of stumpage in some timber stands and underestimates in others. Further, we demonstrate that number of bidders has an important impact on bids, but that this could create even more problems for resolving the trade dispute.

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File URL: http://web.uvic.ca/~kooten/REPA/WorkingPaper2004-04.pdf
File Format: application/pdf
File Function: Final version, 2004
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Publisher Info
Paper provided by University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group in its series Working Papers with number 2004-04.

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Length: 34 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:rep:wpaper:2004-04

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Web page: http://www.repa.vkooten.net
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Related research
Keywords: Canada-U.S. softwood lumber trade; truncated regression; timber auctions; public ownership of forestland;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
Q27 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Renewable Resources and Conservation: Issues in International Trade
Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Nelson, Forrest D., 1984. "Efficiency of the two-step estimator for models with endogenous sample selection," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 181-196. [Downloadable!] (restricted)
  2. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 120-137 National Bureau of Economic Research, Inc. [Downloadable!]
  3. Brannman, Lance & Klein, J Douglass & Weiss, Leonard W, 1987. "The Price Effects of Increased Competition in Auction Markets," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 24-32, February. [Downloadable!] (restricted)
  4. Paarsch, Harry J., 1984. "A Monte Carlo comparison of estimators for censored regression models," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 197-213. [Downloadable!] (restricted)
  5. Brannman, Lance Eric, 1996. "Potential Competition and Possible Collusion in Forest Service Timber Auctions," Economic Inquiry, Oxford University Press, vol. 34(4), pages 730-45, October.
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