Price elasticities of substitution between species in the demand of U.S. softwood lumber imports from Canada

Abstract

The softwood lumber that Canada exports to the United States is a heterogeneous mix of spruce, fir, red cedar, pine, hemlock, and other species. The purpose of this study was to determine to what extent each species is a distinct economic good by using a characteristic demand equation. The theory consisted of a cost-minimizing aggregate U.S. demand for imports and of share equations for each species. Partial adjustment was introduced to accommodate out-of-equilibrium observations. The results showed that the demand for each species, except fir, was elastic with respect to the price of that species, with elasticities that differed substantially by species. Cross-price elasticities between individual species were generally small. It is shown how the effect of a price change of any single species consists of two parts: a market-expansion effect that is the same for all species and a substitution effect that is species specific.

The long-run determinants of U.S. lumber imported from Canada revisited

“…(3) is then defined as the ratio of domestic price to import price. It should be noted that, since U.S. lumber imports from Canada might be related to several species of softwood lumber commodities as Hseu and Buongiorno (1993) point out, a single softwood lumber price index may not be sufficient to examine determinants of U.S. import demand for Canadian lumber. As previous studies (i.e., Yin and Baek, 2005;Baek, 2006) have consistently revealed, however, the North American lumber market is found to be integrated, implying that we can treat different lumber commodities as a homogenous commodity and possibly compile a lumber price index.…”

Examination of North American softwood lumber species substitution using discrete choice preferences and disaggregated end-use markets

“…Hseu and Buongiorno (1993) studied the price elasticities of substitution among individual species in the demand of US lumber imports from Canada. Hseu and Buongiorno (1993) studied the price elasticities of substitution among individual species in the demand of US lumber imports from Canada.…”

Federal timber restrictions, interregional spillovers, and the impact on US softwood markets

“…Several econometric studies have examined the determinants of lumber trade between the US and Canada, with a heavy emphasis on the role of exchange rates [4,9,30] and comparative advantage [7,18]. As the US-Canada lumber trade controversy escalated in the mid-1980s but prior to the MOU, two studies examined the welfare effects of potential trade restrictions on Canadian softwood lumber to the US.…”