Journal of Forest Economics > Vol 16 > Issue 4

Sawmill production in the interior of British Columbia: A stochastic ray frontier approach

Kurt Niquidet, , Kurt.Niquidet@nrcan.gc.ca Harry Nelson, , Harry.Nelson@ubc.ca
 
Suggested Citation
Kurt Niquidet and Harry Nelson (2010), "Sawmill production in the interior of British Columbia: A stochastic ray frontier approach", Journal of Forest Economics: Vol. 16: No. 4, pp 257-267. http://dx.doi.org/10.1016/j.jfe.2010.04.001

Published: 0/12/2010
© 0 2010 Kurt Niquidet, Harry Nelson
 
Subjects
 
Keywords
JEL Codes:D24L11Q23
Ray production functionStochastic frontier analysisSawmilling
 

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In this article:
Introduction
General methodology
The empirical model
Discussion
Conclusions

Abstract

We examined the productive efficiency of the interior sawmilling industry in British Columbia using stochastic frontier analysis. Prior sawmilling studies using this method have neglected the multi-output nature of sawmills. To accommodate both lumber and chips as outputs, we used a ray production function and adopted it into the stochastic frontier framework. A translog functional form was specified with three inputs (i.e., capital, labour, and roundwood) and applied to five years (2003–2007) of mill specific production data. The ray production function is flexible allowing factor productivity to vary with the output mix. Results indicated the presence of both economies of scale and technical inefficiency. This suggested that a long-run equilibrium had not yet been reached during this time and might explain recent restructuring occurring in this region.

DOI:10.1016/j.jfe.2010.04.001