An examination of value-added and variable cost trends across Canadian forest regions and sectors

Abstract

Value-added forestry has received much attention in the past few decades as a means of generating more output value for a given timber input. The growth in value-added production in the forest industry is directly affected by changing forest output/input prices, technology, investment strategies, government policies, and a host of other factors. Since many of these factors are unique to each forest region and sector in Canada, it is expected that one would observe a number of different value-added and variable cost trends over time. The purpose of this paper is to examine value-added and variable cost trends in five regions and three sectors of the Canadian forest industry over the 1970–95 period in order to shed light on those that are the most promising. A seemingly unrelated regressions technique is employed to the data set and findings reveal that a number of sectors and regions have exhibited favourable value-added/variable cost trends. Others, however, have not. Suggestions are made as to where future industry investments and government policies might be directed to aid in the development of value-added. Key words: Canadian forest industry, value-added, variable cost, profit, regional analysis, seemingly unrelated regressions