An Econometric Approach to Applied Microeconomic Theories: the Case of Natural Resource-Based Industries
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An Econometric Approach to Applied Microeconomic Theories: The Case of Natural Resource-Based Industries by Hakan Uslu A dissertation submitted to the Graduate Faculty of Auburn University in partial fulfillment of the requirements for the Degree of Doctor of Philosophy Auburn, Alabama May 7, 2016 Keywords: Economic well-being, Demand, Cost Copyright 2016 by Hakan Uslu Approved by Larry Teeter, Professor, School of Forestry and Wildlife Sciences Conner Bailey, Professor, Department of Agricultural Economics and Rural Sociology Duha Altindag, Assistant Professor, Department of Economics Yaoqi Zhang, Professor, School of Forestry and Wildlife Sciences Abstract The forest products industry of Alabama has a dominant role in the state’s economy. The industry has experienced a general downturn in production, employment and number of operating establishments since the mid-1990s. In this study, the possible determinants of the decline in the forest products industry of Alabama are discussed. Moreover, economic impact analyses are used to investigate how the contribution of the industry to the economy of Alabama has changed since the mid-1990s. Additionally, econometric analyses are employed to estimate the relationship between the decline in the industry and changes in the factors behind the decline. Furthermore, additional econometric analyses are employed to estimate the relationship between economic well-being and forest sector dependence in the counties of Alabama. Results showed that the forest products industry of Alabama has lost many employees, production, mills, and contribution to the economy of the state between 1996 and 2012. There is statistically significant relationship between increases in cost of production and decreases in demand for the forest products and the downturn in the industry. Forest sector dependence is significantly associated with lower economic well-being in the counties of Alabama. The results will mainly contribute to the current knowledge gap concerning the determinants and the economic implications of the decline in the forest products industry. Analyzing trends in an industry overtime provides important information to policymakers seeking to establish better policies, and for industry leaders attempting to improve the industry’s competitiveness both in global and domestic markets. ii Acknowledgments First and foremost, praises and thanks to “Allah”, the God, for his blessings throughout my research for completing this thesis successfully. I would like to express my special and sincere appreciation and thanks to my research advisor, Dr. Larry Teeter, and my research committee members, Dr. Conner Bailey, Dr. Duha Altindag, and Dr. Yaoqi Zhang, for giving me opportunity, encouraging my research, and allowing me to grow as a research scientist. I am extremely grateful to my wife Gulten Uslu for her love, patience, understanding, and continuing support to complete this research. To my beloved daughters Elif Zeynep and Ela Duru Uslu, I would like to express my thanks for being such good girls always cheering me up. Last but not the least, I would like to thank my parents, Hasan Basri Uslu and Rabia Uslu, my sisters, Betul Uslu and Sevilay Karakaya, and my lovely nieces and nephew, Sena, Azra, and Kayra Karakaya for supporting me spiritually during my research. iii Table of Contents Abstract ........................................................................................................................................... ii Acknowledgments.......................................................................................................................... iii List of Tables ............................................................................................................................... viii List of Figures ................................................................................................................................ xi GENERAL INTRODUCTION ....................................................................................................... 1 CHAPTER I - Detailed Analysis of Recent Trends in the Forest Products Industry of Alabama, 1996-2012 ........................................................................................................................... 5 Abstract ............................................................................................................................... 5 1. Introduction ................................................................................................................... 6 2. Literature Review.......................................................................................................... 8 3. Data and Methods ....................................................................................................... 13 4. Decline in the Forest Products Industry of Alabama .................................................. 17 5. Regional Variations in the Decline ............................................................................. 23 6. Economic Impact Analysis ......................................................................................... 25 6.1. Alabama (as a whole)................................................................................ 25 6.2. Western Alabama ..................................................................................... 28 6.2.1 Logging (NAICS: 113) .................................................................... 29 6.2.2 Wood Products Manufacturing (NAICS: 321) ................................ 31 iv 6.2.3 Paper Products Manufacturing (NAICS: 322) ................................. 34 6.2.4 Furniture Products Manufacturing (NAICS: 337) ........................... 36 7. Factors behind the Decline in the Forest Products Industry ....................................... 37 7.1. Economic Recessions................................................................................ 38 7.2. Decreasing Demand .................................................................................. 39 7.3. Globalization ............................................................................................. 41 7.4. Timberland Ownership ............................................................................. 43 8. Conclusion .................................................................................................................. 46 References ......................................................................................................................... 50 Figures and Tables ............................................................................................................ 56 CHAPTER II - Impact of Variable Costs, Demand, and Labor Productivity on Changes in the Forest Products Industry of Alabama, 1996-2012 ............................................................ 77 Abstract ............................................................................................................................. 77 1. Introduction ................................................................................................................. 78 2. Empirical Framework ................................................................................................. 82 2.1. Data ........................................................................................................... 82 2.2. Model ........................................................................................................ 85 3. Results ......................................................................................................................... 89 4. Conclusion .................................................................................................................. 95 References ......................................................................................................................... 99 Figures and Tables .......................................................................................................... 105 v CHAPTER III - The Relationship between Forest Sector Dependence and Economic Well-Being in Alabama ...................................................................................................................... 111 Abstract ........................................................................................................................... 111 1. Introduction ............................................................................................................... 112 2. Economic Well-Being and Forest Sector Dependence ............................................. 117 3. Empirical Framework ............................................................................................... 125 3.1. Data ......................................................................................................... 125 3.2. Models..................................................................................................... 132 3.2.1 The forest Sector Dependence, Per Capita Income and Poverty Rates ........................................................................................................ 132 3.2.2 Location Quotient ......................................................................... 136 3.2.3 Complementary Analysis .............................................................. 139 4. Results ....................................................................................................................... 141 4.1. Forest Sector Dependence, Per Capita Income and Poverty