Factor shares in the Canadian forest industries, 1957-84

This study has investigated time-series data from 1957 to 1984 in order to describe the existing functional income distribution and trends in the Canadian forest industries and its constituent sectors viz. logging industry (SIC 04), wood industries (SIC 25), and paper & allied industries (SIC 27). The functional income distribution in these industries has been measured by relative shares of factor inputs: labour, durable capital, money capital, materials, energy, taxes, and entrepreneurship. The study has followed a methodology based on an income accounting approach according to which factor incomes were determined on a realization basis. This approach stresses the cost sharing nature of the resulting relative factor shares. The emphasis is on the long-term trends of relative factor shares, real factor prices, and factor productivities, so that the competitiveness of the industries in the use of various factor inputs was discussed. The principal hypothesis of this study is that: relative factor shares in the forest industries have changed and that the rate of change in a relative factor share is consistent with the difference between the rate of change in real factor price and factor productivity. That is, the observed rate of change in a relative factor share is consistent with the hypothesized rate of change. The results support the principal hypothesis. There is only one exception, that is the observed rate of change in the relative share of stumpage is not consistent with the hypothesized rate of change. In the forest industries, the relative shares of labour, stumpage, taxes, and profit have declined; and those of durable capital, money capital, materials, and energy have increased. Real labour price has substantially increased, while real materials' price has not significantly changed. These and other changes have encouraged technologies which are labour and timber saving, and capital, energy and materials using. As a result, labour productivity and timber productivity have risen, and productivities of other factor inputs have declined. Trends in various variables in the constitutent sectors differ in some cases from the ones for the forest industries in aggregate. The resulting functional income distribution in the Canadian forest industries has been compared with that in the Canadian manufacturing sector and the Finnish forest industries. The directions of change in the relative factor shares, real factor prices, and factor productivities in the forest industries are in general agreement with thsoe in the Canadian manufacturing sector. However, functional income distribution in the Finnish forest industries has been found to be different from that in the Canadian forest industries. Finally, some policy implications of the findings of this study have been suggested and some areas for further research identified.Forestry, Faculty ofGraduat