Exploring the market behavior of the United States forest products industry

This dissertation explores the market behavior and structure of the U.S. forest products industry as represented by the U.S pulp and paper and lumber and wood products sectors. The overall goal is to examine the competitiveness and economic interrelationships of the U.S. forest product input and output markets. To address this goal, we estimate parametric models for the U.S. pulp and paper and lumber and wood products sectors utilizing the Kohli GNP function approach. Then, we employ the Love and Shumway (1994) nonparametric market power test to examine the possibility of imperfect competition in the U.S. pulpwood and roundwood input markets, considering technical change.; We find that the U.S. forest products industry can be suitably modeled by the Kohli-GNP profit maximization approach. In terms of acquiring inputs, forest products firms are generally more responsive to a change in price of domestic output than to a change in price of exports. The supplies of outputs and the demands for inputs are more elastic in the intermediate-run in both sectors illustrating that the U.S. forest products industry responds greatly to changing prices over time. Time allows forest products firms to adjust accordingly through innovation, resource substitution and managerial adjustments of inputs, as price movements occur due to policy changes, market forces and shocks. These results indicate that the U.S. forest products industry is a price responsive market.; Using the Love and Shumway (1994) nonparametric market power test, we find that the U.S. pulp and paper and lumber and wood products sectors are apparently exerting oligopsony to strong monopsony and near perfect competition to mild monopsony in the domestic pulpwood and roundwood input markets, respectively. Technological advantage may give firms unique abilities to gain a bigger share of the market. There are indications that forestry and environmental policies and intervening shocks such as the long running U.S.-Canada lumber trade dispute may have heightened market power exertion in the domestic wood input markets within the time frame of our analysis. The timing of some policies and shocks appears to coincide with subsequent periods of high monopsony power exertion in the U.S. pulpwood and roundwood input markets. Reducing environmental compliance costs and providing tax incentives for firms to participate in the market may help increase competition.