An economic model of Tennessee's lumber and wood products industry

The purpose of this study was to provide a better understanding of the contribution of the Tennessee lumber and wood products industry to the state economy. The approach taken was to develop equations that quantified historical relationships relevant to the lumber and wood products industry. This methodology provided a separate sector, consistent with the state econometric model for the lumber and wood products industry.

The Tennessee Econometric Model (TEM II) provided the basic framework within which the lumber and wood products equations were formulated.

The framework for the manufacturing sector equations in TEM II consists of separate equations for forecasting output, employment, and wages. This basic structure was used in formulating the Tennessee lumber and wood products equations.

The constraints associated with working within the TEM II framework were considered significant in this study. In order to better identify structural relationships in the industry, an alternative set of output equations was developed for structural/simulation analysis.

These equations were formulated using a different set of statistical and economic criteria than the forecasting equations.

The equations resulting from the study provide valuable information about the performance of the lumber and wood products industry in the state economy. The forecasting equations, in their current form, provide forecasts for the industry in terms of output, employment, and wages for the 1979-1986 time period.

The final form of the simulation equation provides a statistically valid method of impact analysis. Specifically, the impact of changes in the furniture and housing markets on the state lumber industry can be tentatively identified.

Though the equations may not be incorporated into the state econometric model in their current form, the research accomplished in their formulation is valuable as a basis for further study of the industry. Additional research is needed to determine if the hardwood industry can be analyzed adequately as a separate sector of the state econometric model and/or by developing a more detailed satellite model.