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The significance of transport costs in the Swedish forest industry

Author

Listed:
  • Hammar, Henrik

    (National Institute of Economic Research)

  • Lundgren, Tommy

    () (Department of Forest Economics)

  • Sjöström, Magnus

    () (National Institute of Economic Research)

Abstract

Environmental and transport policies based on marginal external costs, such as a kilometer tax for heavy goods vehicles, can be constrained by the risk of industries incurring higher production costs than competi-tors in other countries. However, the significance and size of this cost is largely an empirical question. We estimate factor demand elasticities in the wood and the pulp and paper industries using firm level data for the 1990-2001 period on input prices and quantities. The results show that the introduction of a kilometer tax for heavy goods vehicles affects transport demand as well as other factor demands and output, but that the ef-fects are less pronounced in terms of changes in output. In the wood industry, production decreases by be-tween 0.6 % and 3.0 %. The corresponding decrease in the pulp and paper industry is between 0.4 % and 1.3 %. The effects on average profits are small in both industries.

Suggested Citation

  • Hammar, Henrik & Lundgren, Tommy & Sjöström, Magnus, 2006. "The significance of transport costs in the Swedish forest industry," Working Papers 97, National Institute of Economic Research.
  • Handle: RePEc:hhs:nierwp:0097
    Note: Hammar, H. Lundgren, T. & Sjöström, M. (2008) “The significance of road transport costs in Swedish forest industry” is published in Journal of Transport Economics and Policy, 42(1): 83–104
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    References listed on IDEAS

    as
    1. Lundgren, Tommy & Sjostrom, Magnus, 2001. "A flexible specification of adjustment costs in dynamic factor demand models," Economics Letters, Elsevier, vol. 72(2), pages 145-150, August.
    2. Brannlund, Runar & Lundgren, Tommy, 2004. "A dynamic analysis of interfuel substitution for Swedish heating plants," Energy Economics, Elsevier, vol. 26(6), pages 961-976, November.
    3. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    4. Peter A. Diamond & J. A. Mirrlees, 1968. "Optimal Taxation and Public Production," Working papers 22, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. Brännlund, Runar & Lundgren, Tommy, 2005. "Swedish Industry and Kyoto – An Assessment of the Effects of the European CO2 Emission Permit Trading System," Umeå Economic Studies 668, Umeå University, Department of Economics.
    6. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-289, August.
    7. Chambers,Robert G., 1988. "Applied Production Analysis," Cambridge Books, Cambridge University Press, number 9780521314275, May.
    8. Lundgren, Tommy & Sjöström, Magnus, 1998. "A Dynamic Factor Demand Model for the Swedish Pulp Industry, 1998," Umeå Economic Studies 479, Umeå University, Department of Economics.
    9. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
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    Cited by:

    1. Runar Brännlund & Tommy Lundgren, 2010. "Environmental policy and profitability: evidence from Swedish industry," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 12(1), pages 59-78, June.
    2. Brännlund, Runar & Lundgren, Tommy, 2008. "Environmental policy and profitability - Evidence from Swedish industry," Umeå Economic Studies 750, Umeå University, Department of Economics.

    More about this item

    Keywords

    elasticity; factor demand; kilometer tax; forest industry; transport policy; environmental policy;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • R48 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - Government Pricing and Policy

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