Abstract
Factor endowment-based structural change theorems posit that increase in factor endowment of a region leads to an increase in output of the industries that use the factors more intensively. This study uses a dynamic panel regression analysis to examine the linkage between factor endowment and structural changes in Kentucky forest industry. The analysis uses forest-based industries' shares in employment and real output as structural variables in the regressions. Results show that increase in both capital and labor endowments have a positive and significant influence on forest industry structure as the industry uses the respective factors intensively. Moreover, the magnitude of the influence of labor endowment is higher than that of capital endowment. Further, results show that final demand has a marginal positive influence on Kentucky forest industry structure. Results are useful for recommending policy options to improve and sustain Kentucky's forest industry.
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