Scandinavian Working Papers in Economics

Working Papers,
National Institute of Economic Research

No 97: The significance of transport costs in the Swedish forest industry

Henrik Hammar , Tommy Lundgren () and Magnus Sjöström ()
Additional contact information
Henrik Hammar: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden
Tommy Lundgren: Department of Forest Economics, Postal: Swedish University of Agricultural Science
Magnus Sjöström: National Institute of Economic Research, Postal: National Institute of Economic Research, P.O. Box 3116, SE-103 62 Stockholm, Sweden

Abstract: Environmental and transport policies based on marginal external costs, such as a kilometer tax for heavy goods vehicles, can be constrained by the risk of industries incurring higher production costs than competi-tors in other countries. However, the significance and size of this cost is largely an empirical question. We estimate factor demand elasticities in the wood and the pulp and paper industries using firm level data for the 1990-2001 period on input prices and quantities. The results show that the introduction of a kilometer tax for heavy goods vehicles affects transport demand as well as other factor demands and output, but that the ef-fects are less pronounced in terms of changes in output. In the wood industry, production decreases by be-tween 0.6 % and 3.0 %. The corresponding decrease in the pulp and paper industry is between 0.4 % and 1.3 %. The effects on average profits are small in both industries.

Keywords: elasticity; factor demand; kilometer tax; forest industry; transport policy; environmental policy

JEL-codes: D20; H23; R48

19 pages, December 1, 2006

Note: Hammar, H. Lundgren, T. & Sjöström, M. (2008) “The significance of road transport costs in Swedish forest industry” is published in Journal of Transport Economics and Policy, 42(1): 83–104

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