Effects of Timber Prices, Ownership Objectives, and Owner Characteristics on Timber Supply

Abstract

Abstract In this article, we examine factors affecting nonindustrial private timber supply using a consistent estimation method for a limited dependent variable model. The survey data, collected in 1999 from 3,051 Finnish forest owners, includes information on objectives for ownership as well as annual harvest volumes between 1994 and 1998. Ownership objectives are identified using principal component analysis, and five forest ownership objective groups are generated using K-means clustering: multiobjective owners, investors, self-employed owners, recreationists, and indifferent owners. Along with stumpage price, reforestation costs and forest and owner characteristics, including the above objective groups, are used as explanatory variables in estimating the supply equation. A consistent estimation method allowing for heteroscedasticity and non-normality is used. Statistically significant elasticity of the unconditional mean harvest with respect to timber price is 1.3. Recreationists and indifferent forest owners, ceteris paribus, harvest about 2 m3/ha/year less than multiobjective owners and self-employed owners, whereas investors and indifferent owners are more price-responsive than the other groups.