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On Optimal British Columbia Log Export Policy: An Application of Trade theory

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Author Info
Brant Abbott
Abstract

The log export policy suggestion by Dumont and Wright (2006) is critically assessed in an effort to determine if it is based on economic efficiency. The optimal log export policy for British Columbia is derived using two different models. The first model assumes that B.C. is a small open economy, and the second is a two country model that provides B.C. the opportunity to improve its terms of trade. In both cases it is shown that an optimal log export tax when a fixed lumber export tax exists can be characterized as a problem of second best. In that scenario the optimal log export policy is a positive export tax in both models. In the second model a positive export tax is also optimal when there is no lumber export tax, but it is smaller than when the lumber export tax is levied. In comparison to the log export tax recommended by Dumont and Wright (2006), the optimal tax for a small economy is always lower, while it is lower only in certain circumstances for an economy with market power. These results suggest that the Dumont and Wright policy is not efficient.

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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 2008-05.

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Length: 43 pages
Date of creation: Apr 2008
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Handle: RePEc:rep:wpaper:2008-05

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Related research
Keywords: softwood lumber trade; lumber and log interaction; log export tax;

Find related papers by JEL classification:
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

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This page was last updated on 2009-12-2.

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