Abstract
An analysis of pooled data reveals that a nonhomothetic transcendental logarithmic cost function provides an appropriate representation of the hardwood lumber manufacturing industry in southern Ontario. In this study, total cost was specified as a function of mill output; the input prices for wood, labour, and energy; and a measure of mill capacity. All own-price elasticities have the expected negative sign. All input pairs are found to be substitutes, with labour and energy displaying the strongest substitutability relationship. There are economies of scale that have yet to be exploited by sawmills producing less than 16 × 106 board ft (1 board ft = 2.360 dm3) of lumber annually. Scale economies are fully exhausted for mills with annual output greater than this value.
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