The economic effects of the Forest Resources Conservation and Shortage Relief Act on timber prices

Abstract

In response to a new federal law, the Washington State Department of Natural Resources was required to restrict the export of unprocessed logs from state owned lands effective January 1 , 1991. Exported logs receive a greater price than domestically processed logs because of differences in quality, costs, and imperfect markets caused by regulation. A hedonic price approach is used to estimate implicit prices of timber sales characteristics, as well as supply and demand changes, and export restrictions. It is shown that the Forest Resources Conservation and Shortage Relief Act affects the price received in both domestic and export markets. Ceteris paribus, domestic timber prices decline, consistent with increased supply from the restrictions, and export prices increase, consistent with reduced availability. Both grade and species are significant factors in export price premiums. Export price premiums exist, even during a time when environmental concerns have resulted in drastic reductions in domestic timber supplies.