Supply and demand functions for global wood markets: Specification and plausibility testing of econometric models within the global forest sector

Forests cover about one-third of the land surface on Earth. Currently, < 7.5% of this forest area is defined as planted forest. Removals from planted forests are shown to be responsible for about 45% of the global industrial roundwood production. It is therefore of great importance to study how the production of roundwood from planted forests could potentially influence the production of roundwood from natural forests and the global wood markets in general. The objective of this study is to describe and specify the functioning and interdependencies of global wood markets and implement wood removals from different types of forests, such as planted or natural. In this study we use an econometric approach to analyze how global markets affect the amount of wood supply, demand and trade. According to our results and with regard to roundwood supply, only removals from planted forest respond significantly positive to changes in the roundwood prices. The supply of all other roundwood products seems to be nearly inelastic. Regarding wood product demand, all products under consideration show significantly negative responses to changes in product prices. To test the plausibility of our estimations, we implemented the computed elasticities in an economic partial equilibrium model. The results suggest that the nearly inelastic wood supply improves model simulations as the results better replicate historical data compared to the original model version.