A general equilibrium analysis of the economic impact of a reduction in harvest levels in British Columbia

Abstract

This paper examines the economic and social consequences of possible reductions in the Annual Allowable Cut (AAC) in the province of British Columbia. Following a review of studies of the role of the forest industry in the economy of British Columbia, a general equilibrium model is presented to examine the economic impact of AAC reduction where prices of forest products are allowed to fluctuate. While the studies reviewed and this study use different methodologies, the conclusion that emerges is robust: the economic impact of AAC reduction is significant and negative. The social costs in terms of unemployment and community stability/survival are even higher. The paper concludes with a set of recommendations intended to ensure that decisions concerning harvesting reflect comprehensively the costs and benefits involved in terms of the timber and non-timber values involved.