Diana M. Burton

An Astructural Analysis of National Forest Policy and Employment

Linkages between sector-specific policy and sector employment are explored using a nonstationary Markov chain analysis. When parameterization of transition probabilities between employment sectors includes policy variables, hypothesis tests can determine policy impact relative to other variables. This astructural approach eliminates bias inherent in structural models. Application of this technique to Oregons forestry sector and national forest policy demonstrates that macroeconomic forces have statistically important effects on employment while national forest policy, measured as timber sold or timber cut, does not. This result raises questions about forest policy impact analysis and assumptions inherent in national forest policy implementation. Copyright 1997, Oxford University Press.

A REVIEW OF ALTERNATIVE EXPECTATIONS REGIMES IN COMMODITY MARKETS: SPECIFICATION, ESTIMATION, AND HYPOTHESIS TESTING USING STRUCTURAL MODELS

Price expectations play a critical role in commodity markets where producers must make input decisions well before output is realized. This paper brings together alternative expectations regimes, their estimation, and hypothesis tests for use in structural commodity models to determine their use by commodity producers. Extrapolative mechanisms and rational expectations are considered under risk neutrality and risk aversion. The assumptions implicit in the use of aggregate data in these models are made explicit. Structural models using individual survey data are discussed. While Muths rational expectations hypothesis has found widespread acceptance in the macroeconomic literature, empirical results from industry studies indicate that commodity producers may have heterogeneous price expectations, with no single expectations hypothesis dominating. This is not surprising given that different producers possess different information and have different costs associated with information collection and processing.

Estimating statistical properties of political economic decisions

Revelation of criteria implicit in setting policy is addressed in a political economic framework that includes identification and estimation of unknown parameters in the presence of multiple sources of uncertainty. Policy formation is viewed as an optimization process under which the government maximizes a criterion function subject to market constraints. A method for estimating political criterion function weights and their associated standard errors over multiple time periods is presented. The approach is illustrated with an empirical example from Japanese rice and wheat trade policy.

Environmental Regulation Cost and Industry Structure Changes

Nonstationary Markov analyses are used to investigate impacts of environmental regulatory costs associated with compliance on changes in market structure in pulp and paper industries. Results show environmental regulation expenditures have statistically significant effects on the probabilities of capacity moving to a larger company-size category, so industry structure is affected by environmental regulation. However, counter to expectations, results further show consolidation occurs with higher probability when environmental costs are falling rather than when they are rising. Policy analyses that presume immediate policy responses to cost changes or that industry structure is unchanged may yield time-inconsistent policy conclusions. (JEL D21, Q28)