Forest-Mill Integration: A Transaction Costs Perspective

In 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.


Issue Date:
2008
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/37086
Total Pages:
28
JEL Codes:
D23; K23; L22; L73
Series Statement:
REPA Working Paper
2008-07




 Record created 2017-04-01, last modified 2017-04-04

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