Some Comparative Statics
Exercises with a Small Scale Model
of the Italian Forest Sector
Signorotto, E.
IIASA Working Paper
WP-85-055
September 1985
Signorotto, E. (1985) Some Comparative Statics Exercises with a Small Scale Model of the Italian Forest Sector. IIASA
Working Paper. IIASA, Laxenburg, Austria, WP-85-055 Copyright © 1985 by the author(s). http://pure.iiasa.ac.at/2646/
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SOME COMPARATIVE STATICS EXERCISES
WITH A SMALL SCALE MODEL OF THE
ITALIAN FOREST SECTOR
Enor Sipnorotto
C e n t r o S t u d i I n d u s t r i a L e g g e r a , M2Lan, I t a l y
September 1985
WP-85-55
W o r k i n g P a p e r s a r e interim r e p o r t s on work of t h e I n t e r n a t i o n a l
Institute f o r Applied Systems Analysis and h a v e r e c e i v e d only limited review. Views or opinions e x p r e s s e d h e r e i n d o not necess a r i i y r e p r e s e n t t h o s e of t h e Institute or of i t s National Member
Organizations.
IKTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS ANALYSIS
2361 Laxenburg, Austria
FOREWORD
The objective of t h e Forest S e c t o r P r o j e c t at IIASA i s t o study longterm development alternatives f o r t h e f o r e s t s e c t o r on a global basis. The
emphasis in t h e P r o j e c t i s on issues of major relevance t o industrial and
governmentai policy makers in different regions of t h e world who are
responsibie f o r f o r e s t r y policy, f o r e s t industrial s t r a t e g y , and r e l a t e d
t r a d e policies.
The key elements of s t r u c t u r a l change in t h e f o r e s t industry a r e
r e l a t e d t o a variety of issues concerning demand, supply, and international
t r a d e of wood products. Such issues include t h e development of t h e global
economy and population, new wood products and substitution f o r wood products, f u t u r e supply of roundwood and alternative f i b e r sources, technology
development f o r forestry and industry, pollution regulations, cost competitiveness, t a r i f f s and non-tariff t r a d e b a r r i e r s , e t c . The aim of t h e P r o j e c t
is to analyze t h e consequences of f u t u r e expectations and assumptions concerning such substantive issues.
The r e s e a r c h program of t h e P r o j e c t includes a n aggregated analysis
of long-term development of international t r a d e in wood products, and
t h e r e b y analysis of t h e development of wood r e s o u r c e s , f o r e s t industrial
production and demand in different world regions. The analysis is c a r r i e d
out by means of a model of t h e s e c t o r . The purpose of t h i s a r t i c l e i s t o
d e s c r i b e a n Italian country component, suitable f o r analysis of t h e European f o r e s t s e c t o r . Given t h a t similar components are c r e a t e d f o r o t h e r
countries, a European model results by replacing e x p o r t demand and import
supply functions with explicit t r a d e flow activities (for products t h a t have
components in common for all countries).
This work w a s c a r r i e d out while t h e Author w a s in t h e Young Scientists
Summer Program at IIASA in 1984.
Markku Kallio
P r o j e c t Leader
Forest S e c t o r P r o j e c t
ACKNOWLECGEMENTS
The a u t h o r is grateful t o all members of the IIASA Forest S e c t o r Project. A special thanks t o Mr. Lenko who p r e p a r e d t h e computer program.
The responsibility f o r everything written in t h i s p a p e r belongs t o t h e
a u t h o r only.
This p a p e r h a s been supported by CNR, Italy. Special g r a n t IPRA,
sub-project 2, p a p e r 586.
1. INTRODUCTION
2.
THE MODEL
2.1 The Consumption Function
2.2 Production
2.3 Imports and Exports
2.4 Final Remarks on t h e Consumption, Supply, Import and
E x p o r t Functions
3.
THE DATA
4. THE SOLUTION PRINCIPLE AND THE EQUILIBRIUM CONDITIONS
5.
SOME COMPARATIVE STATICS EXERCISES WITH THE MODEL
5.1 Increased Domestic Supply of Pulpwood
5.2 Substitution of Panels f o r Sawnwood in t h e Building Industry
5.3 A Decrease in Transportation Costs
5.4 A S h i f t in t h e Furniture Demand Curve
5.5 An Upward Shift of t h e Demand Functions f o r P a p e r Products
5.6 Increased Import P r i c e s of Wood
6.
SOME FINAL REMARKS
SOME COMPARATIW STATICS EXERCISES
WITH A SMALL SCALE MODEL OF THE
ITALLAN FOREST SECTOR
Enor Signorotto
A simple model of t h e Italian f o r e s t s e c t o r i s presented in t h i s p a p e r .
The methodology used t o set up t h e model is derived from t h e fund of
knowledge and computing techniques developed at t h e IIASA Forest S e c t o r
Project.
The model w e consider h e r e is a n attempt t o study more closely t h e
f o r e s t s e c t o r of a single country (in t h i s case Italy), and to c a r r y out some
simulations t h a t t a k e into account t h e specific f e a t u r e s of t h e Italian f o r e s t
sector.
This i s not always possible with l a r g e s c a l e international t r a d e models
constrained to consider products and regions at a v e r y a g g r e g a t e level.
The model assumes p e r f e c t competition as m o s t of t h e general o r p a r t i a l
equilibrium models do, and being non-dynamic c a n b e used for comparative
s t a t i c s e x e r c i s e s only. Investment i s not considered in t h i s preliminary
version, although i t might be in t h e future.
For this reason t h e simulations c a r r i e d out in section 5 are t o b e
thought of as short-run e x e r c i s e s where t h e problem of investment in new
production capacity i s simply not considered.
Furthermore t h e r e are t w o reasons why w e tend t o consider t h e model
as a preliminary one. The f i r s t r e a s o n concerns t h e data: they come from
many different s o u r c e s and f u r t h e r work should b e done t o make them consistent (e.g. t h e input technical coefficients) and more reliable.
The second reason is t h a t t h e estimates of t h e p a r a m e t e r s of t h e model,
such a s demand, supply, import and e x p o r t elasticities, being v e r y tentative, will r e q u i r e specific econometric work.
2.
THEMODEL
W e consider t h e following forest products:
1.
2.
Logs
3.
4.
5.
6.
7.
8.
Sawnwood
9.
Pulpwood
Pulp for p a p e r
Panels
Newsprint
Printing and writing p a p e r
Packaging p a p e r
Furniture
For e a c h of t h e s e products w e define demand, supply, e x p o r t and
import functions. A s far as logs, pulpwood and pulp are concerned w e do
not consider a demand function, since consumption i s defined in t h e model a s
net c o n s u m p t i o n . t h a t is, t h e amount of a product consumed outside t h e
forest sector. W e assume t h a t no logs, pulpwood or pulp are demanded
o t h e r than by t h e above considered forest industries and t h e r e f o r e t h a t
t h e i r consumption is, by definition, equal to zero.
The requirements of logs, pulpwood and pulp, as w e l l as of t h e o t h e r
products t h a t are inputs of any forest industry, are determined through
technical coefficients as in input-output models.
Consumption. production, e x p o r t and import are always in quantities
(cubic meters or tons); p r i c e s in thousand l i r a p e r cum or ton.
2.1 The Consumption Function
The consumption function is defined for all products except logs, pulpwood and pulp for p a p e r .
W e consider t h e inverse of a demand function:
ri
= Pi(Ci
i = 1 , ...6
(1)
where
Ci
= consumption of good i
ni = p r i c e of good i
More specifically t h e s e functions are of t h e Cobb-Douglas type, t h a t is:
with hi , y, ,
> 0 i =1,...6
and where
of good i with r e s p e c t to i t s own price.
-i s t h e elasticity of
7,
consumption
2.2 Production
The marginal cost of producing good i Qi ( y i ) is a n increasing function
of t h e quantity produced y i .
Again using a Cobb-Douglas specification we have:
with
and where
= marginal c o s t of producing good i
y i = quantity produced of good i
Qt
W e c a n also define a net production vector ( t h a t is t h e production t o be
consumed outside t h e Italian f o r e s t s e c t o r ) as follows:
where A is t h e 9 x 9 matrix of input coefficients and Y is t h e v e c t o r of t h e
production quantities. More specifically t h e elements of t h e matrix A have
these values:
Each f o r e s t industry h a s a n u p p e r limit t o production given by 1980
production capacity; t h e r e f o r e w e have:
Yi
sKk
i=l,. . . ,6
(5
where Ki i s production capacity (see Table 6 below).
2.3 Imports and Exports
Imports are t r e a t e d as t h e rest of t h e world's supply of f o r e s t products t o Italy and they are t h e r e f o r e a n increasing function of p r i c e .
E x p o r t s are t h e rest of t h e world's demand of Italian f o r e s t products, thus a
decreasing function of p r i c e .
T h e r e f o r e we have:
where Mi and Ei are respectively import and e x p o r t p r i c e s , whereas mi
and e, a r e import and e x p o r t quantities (see Tables 7 and 8).
Once again using a Cobb-Douglas function, w e obtain:
Mi
= dt m ipt
i=1,. . . ,9
-C1
i = 1 , . . . ,9
E, = $* e,
where dt ,& ,$* , E *
(8)
> 0 , i =I,. . . ,9
2.4 Final Remarks on the Consumption. Supply. Import and Export
Functions
For each function i t i s possible t o write (we consider h e r e t h e consumption function only, but t h e s a m e applies t o supply, import and e x p o r t
functions as well):
where -rrOi is t h e r e f e r e n c e a v e r a g e p r i c e in 1980 and Coi i s t h e r e f e r e n c e
consumption in 1980.
Now dividing equation (2) by (2') w e obtain:
o r rearranging:
s o t h a t t h e r e f e r e n c e set of elasticities of Table 3 and t h e r e f e r e n c e values
f o r 1980 are all w e need t o set up t h e model, since all o t h e r p a r a m e t e r s
disappear from equation (10).
For each product t h e r e f o r e w e have consumption, supply, e x p o r t and
import functions as in Figure 1.
For each product consumption (which i s in fact consumption outside t h e
f o r e s t s e c t o r ) must be equal t o net production plus imports minus e x p o r t s ,
t h a t i s in matrix notation:
where
C = v e c t o r of n e t consumption
A = input-output matrix
m = v e c t o r of imports
e = v e c t o r of e x p o r t s
Having defined all t h e functions w e needed, w e consider now t h e r e f e r ences values for 1980 and t h e o t h e r p a r a m e t e r values. Afterwards w e will
talk about t h e equilibrium solutions and how t o calculate them.
FIGUBE 1. Consumption, supply, export and import functions. Variables with
s t a r s denote the r e f e r e n c e values f o r 1980.
3.
THE DATA
Pulpwood, logs, sawnwood and panels are always in cubic meters. Pulp,
newsprint, printing p a p e r , packaging p a p e r a n d f u r n i t u r e are in tons
(Tables 1t o 8).
TABLE 1. Average prices in 1980. Thousand lira per cubic meter or ton.
(Source: FAO, ISTAT, CSIL)
Pulpwood
Logs
Sawnwood
Pulp f o r p a p e r
Panels
Newsprint
Printing p a p e r
Packaging p a p e r
Furniture
37.3 p e r
130.7 p e r
215.3 p e r
463.0 p e r
330.3 p e r
483.4 p e r
1,078.5p e r
665.7 p e r
3.249.0 D e r
cum
cum
cum
ton
cum
ton
ton
ton
ton
TABLE 2. Consumption in 1980. Thousand of cubic meters o r tons. (Source: FAO,
ISTAT, CSIL)
Sawnwood
Panels
Newsprint
Printing paper
Packaging paper
Furniture
7,213.0
1,100.0
328.0
1,615.0
2,970.0
1,983.0
T A B U 3. S e t of elasticities with respect t o priae.
Demand
Import
Export
Pulp wood
Logs
Sawnwood
Pulp f o r paper
Panels
Newsprint
Printing paper
Packaging paper
Furniture
TABLE 4. Production in 1980. Thousand of cum or tons. (Source: FAO, ISTAT, CSIL)
Pulpwood
Logs
Sawnwood
Pulp
Panels
Newsprint
Printing paper
Packaging paper
Furniture
T A B U 5. Input coefficients expressed in units of tons or cum required to produce one ton o r cum of forest products. (Sources: FAO, ISTAT, CSIL)
Pulpwood
Logs
Sawnwood
Pulp
Panels
Sawn.
Pulp
Panels
News.
Print
Pack.
-0.40
1.75
4.20
0.45
0.60
1.50
0.30
0.70
0.20
0.60
0.12
Furn.
0.46
0.87
TABLE 8. Production capacity in 1980. Thousand of cum or tons. (Source: CSIL)
Sawnwood
Pulp
Panels
Newsprint
Printing paper
Packaging paper
Furniture
3,766
67
3.337
319
2.307
3,239
3.217
TABU 7. Imports in 1980. Thousand of cum or tons. (Source: ISTAT)
Pulpwood
Logs
Sawnwood
Pulp
Panels
Newsprint
Printing paper
Packaging paper
Furniture
TABU 8. Exports in 1980. Thousand of cum o r tons. (Source: ISTAT)
Pulpwood
Logs
Sawnwood
Pulp
Panels
Newsprint
Printing paper
Packaging paper
Furniture
4.
TEIE SOLUTION PRINCIPLE AND THE EQUILIBRIUM CONDITIONS
We consider t h r e e types of agents: t h e producers, t h e consumers and
t h e t r a d e agents. P r o d u c e r s are profit maximizers; consumers and t r a d e
agencies p u r c h a s e from p r o d u c e r s a t t h e lowest price. The equilibrium
solutions (prices, quantities consumed, produced, imported and e x p o r t e d
f o r each type of goods) can be found as solutions of t h e optimization problem corresponding t o t h e maximization of consumers' and producers'
surplus pius t h e surplus deriving from t r a d e .
This problem can b e stated as (see D. Dykstra, M. Kallio, 1984):
I
15
Max
C C ~ Y { , ~ { I ' W i =1
7
0
Pi (Ci)dci
9
y{
- iz
/
=1 0
Qi(Yi)dYi
where aij are t h e input coefficients of matrix A .
Function (12) t h a t h a s to b e maximized is t h e sum of consumers' and
producers' surplus and t h e surplus deriving from t r a d e .
Eq. (13) i s simply eq. (11) in a different notation and it corresponds t o
t h e material balance.
Eq. (14) states t h a t production h a s an u p p e r limit given by production
capacity K,.
Eq. (15) r e q u i r e s t h e solutions t o be non-negative.
Problem (12)-(15) i s a nonlinear programming problem with mixed
equality and inequality constraints. The necessary conditions t h a t t h e
optimal solutions must satisfy are (see Panik p. 296, 297):
1
1
1
c;,yi ,mi ,ei
Pi (c;) = ri
satisfy (13),(14),(15)
(i)
(ii)
(iii)
(vii)
(viii)
where ri is t h e Lagrange multiplier r e l a t e d t o constraint (13) t h a t gives t h e
dual prices.
According t o (ii) p r i c e rri and consumption are obviously in balance.
Eq. (vii) and (viii) state t h e same f o r imports and exports. This
r e f l e c t s t h e competitive assumption that consumers and t r a d e agents purc h a s e at t h e lowest p r i c e from producers.
W e show now t h a t conditions (iii), (iv), (v), (vi) correspond t o t h e
necessary conditions f o r profit maximization by producers. In fact profit
maximization by p r o d u c e r s corresponds t o t h e following problems:
a
Yi
Necessary conditions f o r problem (16)-(17) a r e :
9
ri
-C
aij rj - Q i ( y r ) - &
j =I
iy
ail
9 -Qi(vC)
ro
-& j]=o
i=1,.. . , 9
(it)
i=1,. ..,9
(ii')
. . ,9
(iii')
i=1,. . . , 9
(iv' )
. . ,9
(vi' )
i +j
i=l,.
i=1,.
Those a r e exactly t h e same as conditions (i), (ii), (iv), (v), (vi) of problem (12)-(15).
W e have t h e r e f o r e shown t h a t a n optimal solution t o problem (12)-) i s
an equilibrium solution of our model of production, consumption and foreign
t r a d e of forest products.
5.
SOME COMPARATIVE STATICS EXERCISES WJTH THE YODEL
In t h i s section w e simulate shifts in demand, supply, import and e x p o r t
functions and calculate t h e new equilibrium solutions produced by t h e
model.
The quantitative results must not b e taken as such but r a t h e r used t o
evaluate t h e capability of t h e model of producing solutions consistent with
economic theory. In any case w e have t r i e d t o e l a b o r a t e scenarios t h a t are
not simply t h e o r e t i c a l e x e r c i s e s , being r e l a t e d t o specific f e a t u r e s of t h e
Italian f o r e s t s e c t o r . Again w e r e c a l l t h a t , in t h e s e e x e r c i s e s , consumption
is in fact n e t consumption, t h a t i s t h e amount of a product demanded outside
the forest sector.
5.1 Increased D o m e s t i c Supply o f P u l p w o o d
The s c a r c i t y of domestic wood r e s o u r c e s i s a major problem f o r t h e
Italian f o r e s t industries. A proposal often brought up i s t h a t of supporting
a national program aimed at developing t h e industrial cultivation of poplar
and o t h e r fast growing wood r e s o u r c e s (such as copse wood), mainly f o r t h e
pulp and panel industries.
Here w e simulate a downward shift in t h e pulpwood domestic supply
c u r v e , such t h a t p r o d u c e r s are willing t o supply 30% more pulpwood with
r e s p e c t t o t h e 1980 quantity f o r t h e same price.
In Table 9 w e r e p o r t t h e percentage changes in t h e equilibrium solutions (omitting variables whose change i s negligible with r e s p e c t t o 1980
values).
There i s obviously a n import substitution e f f e c t as far as pulpwood is
concerned. Pulp production increases slightly whereas panel production,
c o n t r a r y t o expectations, i s not affected a t all. The model t h e r e f o r e suggests t h a t , as far as t h e panel industry i s concerned, a g r e a t e r availability
of domestic wood r e s o u r c e s wouldn't b e a key f a c t o r in improving competitiveness. But t h i s might simply b e a r e s u l t caused by t h e v e r y high level of
aggregation of what w e h e r e call panels, whereas it might still b e a n import a n t f a c t o r if w e consider more specific products (particleboards f o r
instance).
TABLR 9. Increased pulpwood supply.
Pulpwood production
Pulpwood imports
~ u l p w o o dp r i c e
Pulp production
21.1%
-9.3%
-7.2%
3.6%
5.2 Substitution of Panels for Sawnwood in the Building lndustry
Sawnwood and panels a r e both important inputs of t h e construction
industry. It is noteworthy though, t h a t t h e use of wood based panels is
lower in t h e Italian construction industry compared with o t h e r developed
countries.
W e have t h e r e f o r e imagined a scenario in which a strong substitution
p r o c e s s of panels f o r sawnwood t a k e s place. To do t h a t w e left t h e total
amount of sawnwood and panel consumption at t h e 1980 level, but w e shifted
t h e i r demand c u r v e s in such a way t h a t t h e s h a r e of panel i n c r e a s e s from
15% t o 25% of t h e total (panel + sawnwood) consumption.
Table 10 shows t h e r e s u l t s of this change on t h e forest sector as a
whole.
W e note t h a t a relatively small change in t h e composition of final
demand between panels and sawnwood h a s remarkable effects on t h e whole
system. The effect i s particularly strong on panel production t h a t r e a c h e s
t h e u p p e r bound constraint given by production capacity in 1980. Imports
of panels increase as well t o satisfy t h e higher domestic demand, obviously
less when t h e production capacity constraint is released.
The consequences for sawnwood a r e , not surprisingly, t h e opposite.
Changes in equilibrium values are not limited t o panel and sawnwood, but
involve r a w wood as well. It is noteworthy t h a t t h e substitution p r o c e s s of
panels f o r sawnwood leads t o higher pulpwood production, imports and
prices, whereas production, imports and p r i c e of logs d e c r e a s e sensibly.
TABLR 10. Substitution process of panels f o r sawnwood.
Panel consumption
Panel production
Panel imports
Panel e x p o r t s
Panel p r i c e
Sawnwood consumption
Sawnwood production
Sawnwood imports
Sawnwood e x p o r t s
Sawnwood p r i c e
Pulpwood production
Pulpwood imports
Pulpwood p r i c e
Logs production
Logs import
Logs p r i c e
With capacity
constraint
87.9%
24.3%
32.7%
-24.6%
36.9%
-14.8%
-19.7%
-9.6%
10.6%
-8.8%
12.1%
17.6%
13.3%
-6.6%
-9.3%
-7.2%
Without capacity
constraint
98.6%
32.4%
22.1%
-18.1%
24.8%
-15.0%
-21.5%
-9.1%
10.0%
-8.3%
14.8%
21.8%
16.4%
-6.0%
-8.5%
-6.6%
5.3 A D e c r e a s e in T r a n s p o r t a t i o n C o s t s
High transportation costs a r e a key problem f o r t h e Italian f o r e s t sect o r . The low efficiency of t h e Italian p o r t and transportation system is, at
l e a s t partially, responsible f o r t h e decreasing competitiveness of many
forest industries.
Here w e simulate t h e effects of a policy able t o r e d u c e transportation
costs (and t h e r e f o r e import p r i c e s ) of pulpwood, logs and sawnwood as much
a s 30%. This is c a r r i e d out shifting downward t h e import function of t h e s e
t h r e e products.
Table 11shows t h e r e s u l t s of t h e change on t h e forest s e c t o r .
I t is interesting t o note h e r e t h a t while t h e domestic production of
pulpwood and logs is reduced, t h e domestic production of sawnwood benefits
from a d e c r e a s e in transportation costs of sawnwood and logs. This is
because t h e r e are two effects:
(i) a tendency towards a d e c r e a s e in domestic production of sawnwood, because of t h e loss of competitiveness due to t h e lower
p r i c e of sawnwood imports.
(ii) a gain in competitiveness due t o t h e lower p r i c e of log imports,
and t h e r e f o r e lower input costs.
Our model shows t h a t this second effect is predominant, and t h e r e f o r e
t h a t domestic production of sawnwood increases.
It i s interesting t o note also t h a t t h e only o t h e r industries benefiting
from lower wood costs are t h e panel and pulp industries. The remaining
industries are unaffected by this change in transportation costs.
TABLE 11. Decreased transportation costs.
Pulpwood production
Pulpwood imports
Pulpwood p r i c e
Logs production
Logs import
Logs p r i c e
Sawnwood consumption
Sawnwood production
Sawnwood imports
Sawnwood p r i c e
Pulp production
Panel consumption
Panel production
Panel imports
Panel e x p o r t s
Panel p r i c e
5.4 A Shift in t h e Furniture Demand Curve
The f u r n i t u r e industry had a r a p i d growth during t h e 1970s in Italy
thanks t o a strikingly high rate of growth of domestic demand and e x p o r t s .
An interesting question is: what are t h e e f f e c t s of d i f f e r e n t rate of growth
of domestic demand of f u r n i t u r e on t h e f o r e s t s e c t o r as a whole? H e r e we
c a r r y o u t a shift in t h e demand function such t h a t at t h e same p r i c e of 1900,
consumption is i n c r e a s e d by 28% (corresponding t o a s h i f t of 5%a y e a r f o r 5
years).
From Table 1 2 w e see t h a t t h e main influences a r e , besides f u r n i t u r e
itself, on t h e panel industry which i s closely i n t e r r e l a t e d with f u r n i t u r e
production.
P a n e l consumption (outside t h e f o r e s t s e c t o r ) obviously d e c r e a s e s to
make up f o r t h e i n c r e a s e d demand by t h e f u r n i t u r e industry. Import,
domestic production a n d p r i c e s rise as a r e s p o n s e t o t h e h i g h e r production
level of t h e f u r n i t u r e industry.
Through panels t h e e f f e c t of t h e i n c r e a s e d demand f o r f u r n i t u r e
r e a c h e s pulpwood. The consequences on sawnwood and logs are much less
important, confirming t h e r e l e v a n c e of t h e substitution of panels f o r sawnwood t h a t h a s t a k e n p l a c e during t h e 1970s.
TABLE 12. An upward shift in the furniture demand function.
F u r n i t u r e consumption
F u r n i t u r e production
F u r n i t u r e imports
Furniture exports
Furniture price
P a n e l s consumption
P a n e l s production
P a n e l imports
Panel e x p o r t s
Panel price
Sawnwood consumption
Sawnwood production
Sawnwood imports
Sawnwood e x p o r t s
Sawnwood p r i c e
Pulpwood production
Pulpwood imports
Pulpwood p r i c e
Logs production
Logs imports
Log p r i c e
5.5 An Upward Shift of the Demand Functions for Paper Products
The same shift in t h e demand function f o r f u r n i t u r e has been applied t o
t h e demand functions f o r p a p e r products: newsprint, printing and writing
p a p e r , packaging p a p e r . In Table 13 w e summarize t h e results. Since newsp r i n t production r e a c h e s t h e u p p e r bound given by t h e capacity constraint,
w e also give t h e values obtained releasing this constraint (they are not
much different as it a p p e a r s from Table 13 because t h e additional production capacity required t o satisfy t h e increase in demand is very small).
W e can see t h a t t h e r e are strong effects on pulp and pulpwood imports,
but also on pulp and pulpwood production.
The total value of imports of pulp and pulpwood i n c r e a s e s by 27.6% and
t h a t of p a p e r products consumption (newsprint, packaging and printing
p a p e r ) r i s e s by 34.9%,t h u s t h e elasticity of wood input imports with r e s p e c t
t o domestic consumption of p a p e r products is 0.8. These values give a n idea
of how much a n i n c r e a s e in p a p e r product consumption can worsen t h e
national balance of t r a d e .
TABLE 19.
Upward shift in the demand functions f o r paper products.
Newsprint consumption
Newsprint production
Newsprint import
Newsprint e x p o r t
Newsprint p r i c e
Printing p a p e r consumption
Printing p a p e r production
Printing p a p e r import
Printing p a p e r e x p o r t
Printing p a p e r p r i c e
Packaging p a p e r consumption
Packing p a p e r production
Packaging p a p e r import
Packaging p a p e r e x p o r t
Packaging p a p e r p r i c e
Pulpwood production
Pulpwood import
Pulpwood p r i c e
Pulp production
Pulp import
Pulp p r i c e
With capacity
constraint
16.2%
15.2%
15.2%
-13.2%
17.1%
17.9%
13.4%
9.7%
-8.9%
14.2%
17.1%
14.4%
13.8%
-12.2%
15.5%
10.4%
15.2%
11.5%
12.0%
13.7%
12.4%
Without capacity
constraint
16.9%
16.1%
14.3%
-12.5%
16.0%
no change
no change
no change
no change
no change
no change
no change
no change
no change
no change
9.7%
14.1%
no change
no change
no change
no change
5.6 Lncreased Import Prices of Wood
In this s c e n a r i o w e simulate a n upward shift of t h e import function of
pulpwood, logs and sawnwood. Import p r i c e s are increased by 302, whereas
t h e imported quantity is t h e same as in 1980.
Table 1 4 shows t h e r e s u l t s of this exercise.
W e can see t h a t t h e wood p r i c e increase a f f e c t s all t h e products, confirming t h e relevance of wood imports p r i c e s f o r t h e whole system. The
higher import p r i c e s f o r pulpwood, sawnwood and logs reduce t h e i r
imported quantities, while imports of final products and pulp increase. I t i s
noteworthy t h a t pulpwood and log production i n c r e a s e because of t h e
higher competitiveness of domestic products. whereas sawnwood production
decreases. This might b e explained by t h e fact t h a t , f o r t h e sawnwood
industry, t h e higher p r i c e competitiveness is more than compensated f o r by
t h e higher wood input c o s t s (logs mainly imported).
TABLE
14. Increased import prices of wood.
Pulpwood production
Pulpwood import
Pulpwood p r i c e
Log production
Log import
Log p r i c e
Sawnwood consumption
Sawnwood production
Sawnwood import
Sawnwood e x p o r t
Sawnwood p r i c e
Pulp production
Pulp import
Pulp p r i c e
Panel consumption
Panel production
Panel import
Panel e x p o r t
Panel p r i c e
Newsprint consumption
Newsprint production
Newsprint import
Newsprint e x p o r t
Newsprint p r i c e
Printing p a p e r consumption
Printing p a p e r production
Printing p a p e r import
Printing p a p e r e x p o r t
Printing p a p e r p r i c e
Packaging p a p e r consumption
Packaging p a p e r production
Packaging p a p e r import
Packaging p a p e r e x p o r t
Packaging p a p e r p r i c e
Furniture consumption
Furniture production
Furniture import
Furniture e x p o r t
Furniture rice
6.
SOME FINAL REMARKS
The model w e set up probably oversimplifies t h e real economics of t h e
f o r e s t s e c t o r , but it h a s t h e advantage of being workable. It can be
improved in many ways:
(i)
considering more products (e.g. recycled p a p e r , plywood. particleboards, etc);
(ii) modeling changes in production capacity introducing a n investment function;
(iii) considering more carefully t h e problem of transportation costs;
(iv) paying more attention to elasticities and technical coefficients
estimates.
We believe t h a t with a n e f f o r t in t h i s direction t h e model can b e used as
a v e r y helpful tool to evaluate policies and t r e n d s in t h e Italian f o r e s t sec-
tor.
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