Roundwood supply in Norway: micro-level analysis of self-employed forest owners

This paper presents a short-run roundwood supply analysis of self-employed Norwegian forest owners, based on a two-period utility maximising consumption-savings model. The supply function was estimated by applying the Tobit model on an unbalanced panel of approximately 160 Norwegian farmers, from 1976 to 1997, representing a total of 3413 observations. Simultaneity between the single forest ownerʹs harvesting level and his individual tax rate was allowed by estimating simultaneous equations Tobit models. The current roundwood price and standing stock per hectare had significant positive impacts on the supply, while harvesting costs, age of the owner, tax rate and lagged roundwood price (representing expected price) had negative impacts. Price and cost elasticities were relatively sensitive to the prices forecasted for the owners who did not supply roundwood in a given period. These results suggest that price subsidies and operating subsidies, as well as tax relieves, could increase the harvest level, which is considerably lower than the sustainable harvest level. An operating subsidy seems at least as efficient as a price subsidy, while tax reliefs are the least efficient of the three policy means.