The core data used for this analysis is the ECE/FAO timber data base, supplemented by the ETTS economic data base.9 Import and export unit values were calculated from FAO data on forest products trade. Our expanded approach required a special effort to collect additional data on domestic prices for each product, in each country.10 Although this effort was not completely successful, significant advances were made, and sufficient domestic price data were compiled to support the multiple-equation approach, for the countries of Group I, for most products. We also supplemented the core data with data provided by country correspondents, and with data from published sources. We used annual data, generally from 1964 through 1991, for most countries.
9 Data are available from the ECE/FAO Secretariat.
Import and export prices are the unit value of traded quantities, converted to domestic currencies and deflated. Where there was a choice available, we selected as the domestic price the weighted-average price for all production, or the price index for the commodity group. As an alternative, we selected a price series that was representative of the major component of domestic production. In some cases we used export unit values as a proxy for missing domestic price series. We did not construct multi-year, fixed weight price terms, but we did explore lag structures for prices in most equations.
For nearly all products we have used “apparent domestic consumption” (production less exports) to represent the domestic market quantity (QDS and QDD). This is “apparent” production and consumption because it includes changes in stocks held by both producers and consumers. Ideally, and especially for those countries and products where the majority of production is exported, this series should be adjusted for stock change. However, for the most part we did not have data on changes in stocks held by either producers or consumers. Exceptions are the case of coniferous sawn wood for Sweden, where the domestic quantity is adjusted for changes in consumer stocks, and coniferous sawnwood for Austria, where the domestic quantity is adjusted for changes in producer stocks.11 For net exporting countries, this adjustment can be important, as stock changes produce a cyclical variation in the data that affects both elasticity estimates, and measures of model fit.
For the countries in group I, a composite index of end use activity was constructed for use as an explanatory variable in the demand equations for mechanical wood products (sawnwood and wood-based panels). The development of the end use indicator approach is described in some detail in ETTS IV. For each country and product, the index is
where Ek is the end use indicator for product k, Ci are the component indexes, and Wik are the end-use sector weights. The sector weights vary by product and country, and indicate the relative importance of each of the sectors (construction, general manufacturing, and furniture manufacturing) in consumption of the product group. The component indexes were constructed using the value of residential construction (deflated), the index of industrial production for manufacturing industries, and the index of industrial production for furniture manufacture. The use of a weighted index has the advantage of allowing for the introduction of information specific to specific end use sector, while overcoming problems of multicollinearity.
