Income and time dependence of forest product demand elasticities and implications for forecasting

Abstract

In view of improving multi-country forest sector models, this study investigated to what extent the price and income elasticity of demand for forest products had changed in the past two decades, and how much they depended on the countries income level. For each of seven major product groups annual observations were divided between high-income (top 20% in gross domestic product per capita) and low-income, and between recent (2004–2013) and older (1992–2003) observations. The results indicated that for sawnwood and particleboard the data could be pooled across all countries and years. For the other commodity groups (veneer & plywood, fiberboard, newsprint, printing & writing paper, other paper & paperboard), there were statistically significant differences in gross domestic product or price elasticity between high and low-income levels or old and recent observations. Efficient elasticities were obtained by pooling the maximum number of observations while respecting the statistically significant differences. The resulting GDP elasticities were the same, or very close, across income levels for all products. The price elasticities differed by income level only for newsprint and for veneer and plywood. International forest sector projections to 2065 obtained with these elasticities compared with those based on pooling all data across time and income levels gave less than 3% difference for world consumption of sawnwood, particleboard, fiberboard, and newsprint, but 19% higher consumption for veneer and plywood, 31% for printing and writing paper, and 18% for other paper and paperboard. The world price was 1% to 11% higher for end products and 3% to 22% higher for raw materials and intermediate products.