Canada-US Softwood Lumber Trade Revisited: Examining the Role of Substitution Bias in the Context of a Spatial Price Equilibrium Framework
Brad Stennes and
Gerrit van Kooten
No 2005-08, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group
In the last two decades, softwood lumber trade between Canada and the United States has been characterized by numerous trade restrictions. Many studies have attempted to quantify the effects of such sanctions, and in doing so, softwood lumber was modeled as a single, homogenous commodity. However, recent research has suggested that this may be a misleading assumption, since not all softwood lumber products are equivalent substitutes. We refer to this problem as the substitution bias, and uniquely address this issue in estimating the effects of trade restricting policies. Using a spatial price equilibrium (spe) model, impacts of the post-sla import duties are estimated and compared to estimates of two alternative policy regimes – an export tax and quota. By controlling for substitution bias, our estimates indicate a larger share of the tariff burden is placed on us consumers, with Canadian producers suffering less injury compared to estimates using the traditional homogenous lumber assumption. In addition, by comparing the net impact associated with the alternative policy regimes, a policy equivalence result is found. Our results suggest that the short-run impact of a trade restriction is largely independent of the policy regime incorporated, with the collection of quota rents or tax revenues determining overall winners and losers.
Keywords: Softwood lumber trade; spatial price equilibrium; lumber substitutability (search for similar items in EconPapers)
JEL-codes: Q23 Q27 Q58 (search for similar items in EconPapers)
Pages: 38 pages
References: Add references at CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
https://web.uvic.ca/~repa/publications/REPA%20work ... kingPaper2005-08.pdf Final version, 2005 (application/pdf)
Working Paper: Canada-US Softwood Lumber Trade Revisited: Examining the Role of Substitution Bias in the Context of a Spatial Price Equilibrium Framework (2005)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:rep:wpaper:2005-08
Access Statistics for this paper
More papers in Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group Contact information at EDIRC.
Bibliographic data for series maintained by G.C. van Kooten ().