Demand functions for United States forest product exports to the European Economic Community

Abstract

The European Economic Community (EEC) is becoming an increasingly important market for United States forest products.Prediction of the future size of this market requires a quantitative assessment of the responsiveness of demand with respect to United States prices, the price of products from other countries, and major demand shifters within the EEC.To determine these elasticities, a theoretical dynamic demand model was developed.The model was estimated for each one of seven major groups of United States products sold in the EEC: softwood lumber (SITC 243.2), hardwood lumber (SITC 243.3), pulp and waste paper (SITC 25 I), veneer sheets (SITC 63 1. I), plywood (SITC 63 1.2), newsprint paper (SITC 64 1. I), and other paper and paperboard (SITC 64 1 excluding 64 1.1).Analysis of covariance was the estimation procedure used, based on pooled time series from eight EEC countries observed during the period 1961 to 1977.Elasticities appeared to be the same in all countries, except in the case of softwood lumber and newsprint.Demand was found to be elastic with respect to the American price, except for lumber.Own-price elasticities ranged between -0.2 1 (k0.52) for softwood lumber and -4.72 (i 1.05) for newsprint paper.Cross elasticities of demand with respect to the price of products from other countries ranged from 0.21 (k0.52) for softwood lumber to 8.36 (? 3.17) for hardwood lumber.Demand for hardwood lumber and pulp and waste paper was significantly and negatively affected by the general price level in the EEC.The level of economic activity in the EEC had a strong positive impact on demand for United States forest products.

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