Journal of Forest Economics > Vol 25 > Issue 1

Timber price dynamics after a natural disaster: Hurricane Hugo revisited

Henry W. Kinnucan, , kinnuhw@auburn.edu
 
Suggested Citation
Henry W. Kinnucan (2016), "Timber price dynamics after a natural disaster: Hurricane Hugo revisited", Journal of Forest Economics: Vol. 25: No. 1, pp 115-129. http://dx.doi.org/10.1016/j.jfe.2016.09.002

Published: 0/12/2016
© 0 2016 Henry W. Kinnucan
 
Subjects
 
Keywords
JEL Codes:C22E30Q23R30
Equilibrium displacement modelHurricane HugoLe Chatelier's principleMarket integrationTimber price dynamics
 

Article Help

Share

Download article
In this article:
Introduction
Shifts in market supply in response to an inventory shock
Alternative explanations for price recovery
The excess demand hypothesis
The model
Simulation
Longer term effects
Sensitivity analysis
Summary and conclusions

Abstract

Timber prices in the area struck by a natural disaster such as a hurricane or pest infestation are known to drop sharply immediately following the disaster, only to recover after about a year or so. Previous research attributes the rapid recovery to shifts in supply and demand curves. Our analysis suggests the more probable explanation is rotation in the curves. Supply and demand shifts come into play in the second and third years as rebuilding from the hurricane begins in earnest, and as timber inventory is rebuilt in response to elevated price expectations. But for the period in which price recovery occurs, model simulations based on data for Hurricane Hugo indicate the major causal factors of the observed price dynamics are curve rotation and trade with the surrounding undamaged region. Inventory-based supply shifts, the previously-identified causal factor, play a minor role in the observed price dynamics. Getting the causal factors right is important for predicting the price effects of forest inventory shocks, and for proper measurement of their welfare effects.

DOI:10.1016/j.jfe.2016.09.002