Comparative advantage of countries in forest-products trade

Abstract

The objectives of this paper were to define, measure and explain differences in the comparative advantage of countries which trade forest products. The theory of Heckscher, Ohlin and Vanek was used, which led to a direct relationship between a country's net trade, its endownment in resources, and its domestic income. From these equations an index of revealed comparative advantage was derived and used to rank countries in the early 1980s for major groups of forest products. This ranking led to country groupings which suggested a definite relationship between the comparative advantage of a country, its endowment in forest and other resources, and domestic demand. This relationship was tested formally with an empirical model based on the Heckscher-Ohlin-Vanek equations. This simple model explained a large part of the variation in the net trade of total forest product, roundwood, sawnwood, panels, pulp, and paper, in the early 1960s and 1980s. In general, there was a strong positive relationship between net trade and the level of domestic demand, reflected by income. For some commodities, especially logs, this relationship had become stronger between the early 1960s and 1980s.