Estimating price and income elasticities of demand for imports of forest products from panel data

Static and dynamic models of the derived demand for forest product imports were estimated for each of 10 major forest products covering industrial roundwood, wood-based panels, pulp, and paper and paperboard. The models were estimated with panel data from 64 countries for 1970-1987, by pooled ordinary least squares, first differencing, fixed effects, random effects and the Arellano-Bond approach. The predictive accuracy of the demand equations was tested with postsample data from 1988-1997. Based on multiple criteria, the best results were obtained with the dynamic model estimated by the Arellano-Bond method. For most products the demand for imports was found to be inelastic with respect to price. For all products the demand for imports was elastic with respect to income.