Spatial spillover effects of global forest product trade

Abstract

Spatial spillover is widespread in forest product trade. We employ a spatial autoregressive (SAR) interaction model to analyze spatial spillover effects of global forest product trade in 2004 and 2014 and their underlying determinants. The SAR interaction model, specified with three types of spatial dependence (origin-to-origin, destination-to-destination and origin-to-destination) can account for the complex spatial interconnection of forest product trade, leading to unbiased and consistent estimates of effects of determinants on trade flows. Although all the spatial dependence parameters are statistically significant, the spatial interconnectivity was much stronger among destination countries than across origin countries. The identified spatial dependence reflects a core-periphery structure of the trade network. The effect decomposition shows that changes in the principal explanatory variables in the SAR interaction model had a greater total effect (TE) on trade flows in 2014 than in 2004. This attributes to a substantial increase of the origin effect (OE), destination effect (DE) and network effect (NE) from 2004 to 2014. Especially, NE rose by a big margin during this period and accounted for approximately 45% of TE in 2014 for each determinant. Based on the magnitude of NE that represents the spatial spillover effect, gross domestic product (GDP) ranked first, followed by gross national income (GNI) per capita, roundwood production per capita and tariffs. Besides the strong evidence of spatial spillover effects, we also find that countries tended to mimic their neighbors in forest product trade engagements. Our findings shed new light on the spatial interconnection of global forest product trade and offer implications for future trade and forest conservation policy design.