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GTAP Resource #1132

"Regional Environmental Regulations and Technical Change in the U.S. Forestry Sector: A Multiregional CGE Analysis"
by Das, Gouranga, Janaki Alavalapati, D.R. Carter and Marinos Tsigas

Growing environmental concerns and rising demand for recreation and amenity values are leading to significant changes in the U.S. forest sector. Furthermore, timber producers are expected to comply with a series of environmental regulations that could increase production costs. On the other hand, burgeoning demand for forest products is prompting producers to search for technological innovations to further forest productivity. In this paper, a multiregional computable general equilibrium model, which divides the U.S. into four broad geographical regions and aggregates other nations into the rest of the world, is used to analyze the effects associated with environmental and technological policy shifts. In particular, we analyze the impacts of —(i) a 20 percent reduction in the harvest of timber in the Pacific Northwest relative to other regions; (ii) a 5 percent increase in the cost of timber production in the U.S. South relative to other regions due to environmental regulations; and (iii) a 2 percent Total Factor Productivity (TFP) improvement in the South and 1 percent TFP improvement in the other three U.S. regions. The results show that a 20 percent reduction in timber harvest induces a shift in regional production and visible gains in welfare, especially in the U.S. South. Further, higher technical progress in the South as compared to the other three regions contributes to an overall increase in forest products output and welfare in the U.S. and the rest of the world. On the contrary, an increase in the cost of production in the U.S. South, in response to additional environmental regulations, is shown to reduce welfare for the U.S. and globally. Results of this analysis help forest companies and landowners make production decisions and guide policy makers toward developing appropriate policies to further forest conservation and economic development in the U.S.

Key Words: CGE, Environmental regulation, Policy, Total Factor Productivity, Welfare

Resource Details (Export Citation) GTAP Keywords
Category: GTAP Application
Status: Published
By/In: Forest Policy and Economics, 7(1):25-38, Jan. 2005.
Date: 2005
Created: Conner, J. (6/24/2002)
Updated: Batta, G. (1/17/2013)
Visits: 3,001
No keywords have been specified.

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