Long Run Timber Supply: Price Elasticity, Inventory Elasticity, and the Capital-Output Ratio

Binkley, C.S. (1985). Long Run Timber Supply: Price Elasticity, Inventory Elasticity, and the Capital-Output Ratio. IIASA Working Paper. IIASA, Laxenburg, Austria: WP-85-010

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Abstract

Timber production requires substantially more capital per unit output than do most economic enterprises. The quantity of capital deployed depends primarily on the rotation length and the output price of stumpage. In a long run timber supply model this gives rise to a "backward bending" supply curve. This paper summarizes a long run model of timber supply, and computes the associated price and inventory elasticities. The role of capital in timber production is explored through a continuous time formulation of the usual Faustmann point input/point output model. The theoretical results are illustrated through an example based on loblolly pine yields.

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