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Resources and the regional economy, an historical assessment of the forest industry in British Columbia

by Metcalf, Cherie Maureen

Abstract (Summary)
This thesis provides empirical evidence to assess the long term contribution of the B.C. forest industry to the provincial economy. Estimates of resotwce rent are constructed to mesure the direct contribution of the resource to provincial income and growth. Measures of rent are constructed for a fkm level sample (1906-76) and at an industry level (1918- 92). The figures for rent are used to generate estimates of the share of provincial income measures directly attributable to the industrial exploitation of the province's forests. While there were periods during which the direct contribution to provincial income and its growth was nontrivial, in general the growth of forest industry rent did not drive overail econornic gr~wth but rather tagged behind. Rent was IQW on averzge and volatile dur'ing the years before W.W.11, rose rapidly fkom roughly 1940-51, then declined unevenly. To investigate the forces whch underlie both the broad trends and the v'ariabity in rent, a stylized mode1 of the forest industry is applied in an empkical analysis. Broad changes in aggregate rent were the result of changes in rent pes unit of B.C. timber. The rapid increase in rent coincided with a marked rise in the price of forest products. The seculaz dec'he resulted fkom the combination of a falling output price and rising costs. An investigation of real harvesting costs indicates that depletion played a role in this increase. The variability of rent is also explored and found to be most strongly iduenced by factors reflecting market risk which the B.C. industry could not diversify away from. The rent mesures may not capture the Ml impact of the forest industry, so the industry's potential role as a leading export sector is also exarnined. The possibility of a stable long term link between forest exports and provincial income is investigated using cointegration tests. B.C. forest exports and G.D. P. are not cointegrated; their levels are not Iinked in a deterministic way in the long run. A bivariate VAR is used to examine the short run interaction between the growth of forest exports and provincial G.D.P. The results do not strongly support the view that the forest industry zts as a leading export sector in the provincial economy.
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Source Type:Master's Thesis

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Date of Publication:01/01/1999

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