Inventories, expectations, and environmental effects on industry structure: Three essays on pulpwood and sawtimber markets

This dissertation addresses three problems faced by researchers studying natural resource based industries. First, gathering information on natural resource inventories is expensive. This inhibits data collection and makes resource sector modeling and policy analysis challenging. Second, because producers do not know future market conditions with certainty, forecasts of resource prices are required. Price expectations play major roles in natural resource markets since each period producers must decide whether to exploit or retain resources. Third, environmental regulations are important in many natural resource industries. Given that many natural resource processing industries are highly concentrated, changes in environmental regulations may impact industry structure. This dissertation addresses each one of these issues in the context of timber markets.; The first essay develops a method to impute missing inventory and growth observations when annual survey observations are not available. A one-way error component model is estimated and missing inventory values are imputed using an optimally-weighted combination of forward and backward projections. Confidence intervals for imputed inventory estimates are formed using the bootstrap method.; The second essay uses a model of producer behavior to analyze alternative price expectations mechanisms and their role in the timber harvest decision. The model allows for the possibility that producers are risk averse. Non-nested test procedures are applied to distinguish which of the alternative expectations regimes producers are using. The results show that landowners are risk averse, and that the price expectation mechanism that best fits the data is the nonparametric quasi-rational representation.; The third essay explores the linkages between environmental regulations and market structure using stationary and nonstationary Markov chain analysis. An application to the pulp and paper industry in Arkansas, Louisiana, and Texas show that environmental regulation affects the probabilities of production capacity moving from smaller company ownership to larger company ownership. This result empirically confirms theoretical suggestions that market structure is endogenous to environmental policy.