Forest-Mill Integration: A Transaction Costs Perspective

Kurt Niquidet and O'Kelly, Glen

No 2008-07, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group

Abstract: In Canada, where public ownership of forestland is prevalent, a central decision facing policy makers is how to allocate timber resources to private forest companies. Debates tend to focus around what proportion of the annual harvest should be devoted to markets opposed to long-term contracts. To give a guide to policy makers, we surveyed forest firms from New Zealand and Sweden where this decision is based purely on a commercial basis. On average, mills source fifty percent of their fibre from the market. However, using a fractional logit model, we test whether theories from transaction cost economics influence this decision. Results are consistent with transaction cost economics; firms decrease the proportion of fibre sourced from a market with increasing fibre specificity, capital intensity, and uncertainty.

Keywords: transaction costs; forest tenure; vertical integration (search for similar items in EconPapers)
JEL-codes: D23 K23 L22 L73 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-com, nep-cse, nep-law, nep-mic and nep-ore
Date: 2008-04

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Persistent link: http://EconPapers.repec.org/RePEc:rep:wpaper:2008-07

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