Forest-Mill Integration: A Transaction Costs Perspective
AbstractIn Canada, where public ownership of forestland is prevalent, a central decision facing policy makers is how to allocate timber resources to private forest companies. Debates tend to focus around what proportion of the annual harvest should be devoted to markets opposed to long-term contracts. To give a guide to policy makers, we surveyed forest firms from New Zealand and Sweden where this decision is based purely on a commercial basis. On average, mills source fifty percent of their fibre from the market. However, using a fractional logit model, we test whether theories from transaction cost economics influence this decision. Results are consistent with transaction cost economics; firms decrease the proportion of fibre sourced from a market with increasing fibre specificity, capital intensity, and uncertainty.
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Bibliographic InfoPaper provided by University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group in its series Working Papers with number 2008-07.
Length: 28 pages
Date of creation: Apr 2008
Date of revision:
transaction costs; forest tenure; vertical integration;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-05-05 (Agricultural Economics)
- NEP-ALL-2008-05-05 (All new papers)
- NEP-COM-2008-05-05 (Industrial Competition)
- NEP-CSE-2008-05-05 (Economics of Strategic Management)
- NEP-LAW-2008-05-05 (Law & Economics)
- NEP-MIC-2008-05-05 (Microeconomics)
- NEP-ORE-2008-05-05 (Operations Research)
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