Three Essays on Applied Economics and Policy in the US Forest Sector: Evidence from Lumber Trade Disputes, Foreign Direct Investments, and Land-Use Change

Abstract

This dissertation examines how economic policies influence forest sector markets, foreign investment, and land-use decisions in the United States. It consists of three essays that analyze the effects of trade and tax policies on forest product markets, investment behavior, land-use change, and carbon sequestration outcomes. The first essay evaluates the market and welfare effects of the 2017 reinstatement of US tariffs on Canadian softwood lumber. Using quarterly data from 1980–2024, an instrumental variables framework estimates US lumber demand and supply functions together with Canadian and rest-of-world export supply functions. The estimated elasticities are incorporated into an Equilibrium Displacement Model (EDM) to quantify welfare impacts. Results show that tariffs increase US lumber prices, reduce domestic consumption, expand domestic production, and decrease imports from Canada. The welfare analysis indicates that consumer losses substantially exceed producer gains, implying a significant redistribution of welfare from consumers to domestic producers. The second essay investigates the dynamic effects of persistent tariffs on Canadian outward foreign direct investment (FDI) in the US forest products sector. A theoretical export–FDI framework predicts a dip–jump–erosion pattern in which tariffs initially reduce foreign investment because of policy uncertainty, subsequently stimulate tariff-jumping FDI in the protected market, and ultimately depress long-run investment by increasing production costs and lowering profitability. Using annual data and autoregressive distributed lag (ARDL) models, the empirical results support this dynamic adjustment process and help reconcile mixed findings in the tariff–FDI literature. The final essay examines the effects of property taxation on land-use transitions and forest carbon sequestration in Alabama. Using parcel-level data for 178,119 privately owned parcels from 2017 to 2022, discrete choice models estimate transitions among agriculture, forestry, and pasture. The results indicate that lower property taxes on forestland encourage forest retention and afforestation, potentially avoiding 0.19–0.75 million acres of deforestation and increasing annual carbon sequestration by 1.5–6.1 million metric tons of CO₂ through 2035. Overall, this dissertation demonstrates that trade and tax policies have important implications for forest markets, multinational investment, land-use decisions, and climate change mitigation.