Building a Simultaneous Equations System for Domestic Softwood Sawlog Market and Forestry Labor Market

Abstract

In an effort to enhance our understanding of the dynamics of Japanese forestry, I estimated the simultaneous equations system consisted of demand and supply functions of domestic softwood sawlog market and forestry labor market. Although there has been a sizable literature on demand and supply model in sawlog and stumpage markets, to which the results in this study agree in many aspects, modeling of forestry labor market is the first-ever attempt as such. The estimation employed the yearly time-series data for the nation from 1971 to 2004. Estimation results show that during the thirty years the Japanese forestry had been faced to demand decline in sawlog market on one hand and supply decline in forestry labor market on the other hand, and thereby that market-clearing quantities of sawlog and forestry labor had both fallen, which meant the downscale of the forestry sector. Estimated system crossing over the two markets makes it possible to calibrate the effects of exogenous variables on both markets. It is observed among others that rising rural wage affects not only forestry labor market to decline forestry labor supply but also sawlog market through a rise of forestry wage to decline sawlog supply.