Immunity from the Resource Curse? The Long Run Impact of Commodity Price Volatility:

Evidence from Canada, 1900-2005

Appendices: Model Structure, Sensitivity Testing, Data

Ian Keay Department of Economics

Queen's University Kingston, Ontario, Canada

K7L 3N6 ikeay@econ.queensu.ca

1

1. Model Structure

1.1 Objective Function In standard renewable resource dynamic optimization problems, resource firms choose inputs (∴ output) to maximize the present value of the stream of resource rents into the indefinite future.

!"#   ! !! !!!"!"!

!

Where ϕ is a discount rate. 1.2 Profit / Resource Rent Profit for resource firms is derived from the return earned by the fixed factor in production (natural capital Bt), and is equal to total revenue less the opportunity cost of human and reproducible capital.

!! = !!!! − !"!!! − !"!!! Assuming Cobb-Douglas production technology, after profit maximizing first order conditions are imposed, we can write:

!! = !!!! − !(!"!,!"!)!!!/(!!!!!)

Where c(wLt, wKt) is an average cost function. Expectations are formed in the presence of output price uncertainty:

! !! = ! !! ,!"! !! − !"!!! −  !"!!!

Where we can write:

! !! ,!"! = ! + !!! + !!

And: !!~!(0,!"!)

A simplified log-linear profit function can take the form1:

!! = !! + !!!! + !!!! + !!!"! + !!!"! Or, to assess the direct impact of input choice on profits we can also write:

1 Note that after taking natural logarithms, a standard profit function does not take this linearized form. As such this specification must be considered ad hoc. For estimation results from a range of alternate specifications see Table A2.2 and A2.3.

2

!! = !! + !!!! + !!!! + !!!! + !!!! + !!!"! + !!!"!

Prices and productivity should enter positively, opportunity costs should enter negatively, and because human and reproducible capital affect output and costs, we can have no a priori expectations regarding their sign. 1.3 Technology We can assume a Cobb-Douglas production function with a Hicks neutral technology parameter, and no constraints on returns to scale.

!! = !!!!!!!!

!!!!!!

Technology is assumed to evolve such that:

!! = !(!!!!!!!) The technology parameter (at) is an exogenous representation of the underlying trend in sector-specific total factor productivity (ie. smoothed TFP). ∴ a log-linear production function takes the form:

!! = !! + !!!! + !!!! + !!!! + !!!! We should expect all arguments to enter positively. 1.4 Natural Growth Natural capital accumulates over time in response to investments made in accumulation - such as infrastructure, silviculture, or biotechnology - that are subject to standard economic investment incentives, and due to determinants of the assets' biological growth capacity. Many biological growth functions exist for forestry assets, but at a sector-specific level of aggregation, only a highly simplified biological model is empirically tractable. We can assume a simple logistic growth function for natural capital:

! = ! !! − !! Where:

! !! = !! + !!!! + !!!!! Because we should expect growth as a function of current stock levels to have an "inverted U-shape", such that current stock levels enter G(Bt) positively, but at a decreasing rate. 1.5 External Investment Supply

3

We can assume that resource firms treat investment supplies from formal-external sources as close substitutes. Because a firm's equity prices reflect the willingness of investors to supply investment funds through formal-external equity markets, a firm's equity prices reflect the supply of investment funds available on these markets. Rising (falling) equity prices reflect increasing (decreasing) supplies of investment funds, and lower (higher) investment costs from these sources. I assume a multi-factor CAPM equity pricing model, in which changes in the forestry sector's equity prices (rt) depend on changes in composite market returns, and (deviations from) expected profits, where the formation of expectations are a function of price volatility.

!! = !! + !!!!"#! + !!!"! + !!!! We should expect composite market returns and profits to enter positively, and price volatility to enter negatively. 1.6 Solving the Model Define a present value Hamiltonian:

! = ! !! + !(! !! − !!) Where κ is the shadow price (marginal resource rent) for natural capital. The first order conditions include: Maximum Principles:

!"!" = 0

Where x = control variables (human and reproducible capital). Portfolio Balance Condition:

!"!" = !" − !

Dynamic Constraint:

!"!" = !

Transversality Conditions. We can then invoke steady state, and solve for steady state control, state and co-state variables, which can then be used to solve for steady state production, profits and equity prices. Second order conditions can be verified, and dynamics towards steady state traced out.

4

1.7 Input Accumulation The input accumulation functions that result from the resolution of a renewable resource dynamic optimization problem, reflect investment demand functions. Investment demand for human and reproducible capital depends on expected profits, the cost of investment funds from formal-external sources, and the inputs' opportunity costs. Investment demand for natural capital also depends on these economic incentives, but it is further influenced by biological growth determinants. ∴ simplified log-linear accumulation functions can take the form2:

!!!! = !! + !!!!!! + !!!"!!! + !!!!!! + !!!"!!! + !!!"!!!

!!!! = !! + !!!!!! + !!!"!!! + !!!!!! + !!!"!!! + !!!"!!! !!!! = !! + !!!!!! + !!!"!!! + !!!!!! + !!!"!!! + !!!"!!! + !!!! + !!!! + !!!!!

We expect profits and the supply of external investment funds (equity prices rt) to enter the accumulation functions positively, and price volatility and the input's own opportunity cost to enter negatively. Other opportunity costs should enter positively (negatively) if the inputs are substitutes (complements). Past stock levels (Bt) should enter the natural capital accumulation function positively, but at a decreasing rate.

2 If optimality were imposed, the input accumulation functions would not take this form. They would be functions of the exogenous variables alone, and we could not, therefore, trace out the interdependent links among the endogenous variables. Because we have not imposed optimality and we are not estimating a fully-structural system, these functions can be considered quasi-structural. The estimation of the system of simultaneous equations takes into account the endogeneity implied by this specification. For estimation results from a range of alternate specifications see Table A2.1 and A2.5.

5

2. Sensitivity Testing3

Table A2.1: Fully Reduced Form System

Reproducible Capital: kt+1

Natural Capital: bt+1 Labour: lt+1 Investment Supply: rt

pt

wkt-i

wlt-i

at σpt-i

Bt

B2t

rmktt

constant

0.707*** (0.245)

-0.305*** (0.114) 1.659** (0.718) 0.457** (0.194) -0.018 (0.017)

0.206** (0.094) -0.003 (0.036)

1.208*** (0.247) 0.196* (0.108) -0.935 (0.639)

-0.857*** (0.170) -0.006 (0.015)

0.876*** (0.153)

-1.062*** (0.191) 0.207** (0.082)

-0.117*** (0.035)

0.421** (0.188)

-0.120** (0.057) -0.595* (0.357)

0.387*** (0.145) -0.005 (0.009)

0.093** (0.047) 0.0001 (0.019)

1.072** (0.464)

-0.314** (0.135)

-2.023** (0.887)

-0.694** (0.345)

-0.045** (0.019)

0.891*** (0.110)

0.112*** (0.043)

R2 N

0.239 102

0.433 103

0.161 104

0.564 105

Note: In the fully reduced form system, the impact of price volatility on investment supply is still strongly asymmetric (larger and significant only during episodes of crisis) and its impact significantly weakens over time (results not shown).

3 Unless otherwise stated, all sensitivity tests are estimated as a system of simultaneous equations using iterative three-stage GLS.

6

Table A2.2: Translog Profit and Production Function Specifications

Translog Profit: πt

Translog Production: qt

Reproducible Capital: kt+1

Natural Capital: bt+1

Labour: lt+1 Investment Supply: rt

πt-i

qt

kt

k2t

bt

b2t

lt

l2t

atkt

atbt

atlt

ktbt

ktlt

btlt

rt-i

0.599*** (0.020) 0.010

(0.098) 0.042** (0.017) -0.015 (0.054)

0.301*** (0.038)

-1.366*** (0.304) 0.139

(0.447) 0.082

(0.204) -3.046***

(0.741) 0.248** (0.101) -0.183 (0.284) -0.375* (0.199)

0.699*** (0.040)

0.068** (0.032)

0.357*** (0.086)

-0.429** (0.198)

0.133*** (0.049)

0.076** (0.034)

0.134*** (0.027)

0.319*** (0.095)

wkt-i

wk2t-i

wlt-i

wl2

t-i

wkt-iwlt-i

at

a2t

σpt-i

Bt

B2t

rmktt

constant

-0.273*** (0.088)

-0.0008** (0.0004)

-2.896*** (0.186)

0.094*** (0.013)

0.084*** (0.012)

1.277* (0.699)

0.766*** (0.046) -0.606 (0.423)

0.006 (0.004)

-0.153** (0.061)

-0.176 (0.394)

-0.008 (0.010)

0.013 (0.021)

0.189* (0.101)

-0.860 (0.637)

0.004 (0.015)

0.778*** (0.150)

-0.928*** (0.186)

-0.122*** (0.036)

-0.149*** (0.052)

-0.225 (0.343)

0.0009 (0.008)

-0.018 (0.017)

-0.036* (0.021)

0.927*** (0.121) 0.078* (0.044)

R2 N

0.969 105

0.929 105

0.741 104

0.344 103

0.318 102

0.439 105

Note: In the translog profit function all prices are normalized by output prices. In the translog production function the interaction between each input and TFP indicates the presence of input using (> 0) or input saving (< 0) biased technological change.

7

Table A2.3: Alternate Profit Function Specifications

Profit: πt (Table 1)

Reduced Form Levels Include qt Include bt Include rt

qt

kt

bt lt

rt-i

1.044*** (0.063)

0.162 (0.113)

8.745*** (0.590)

18.790*** (4.168)

1.813*** (0.106)

1.050*** (0.063) -0.070 (0.073) 0.145

(0.115)

1.010*** (0.066)

0.141 (0.124) 0.065

(0.058) pt

wkt-i

wlt-i

at σpt-i

rmktt

constant

1.362*** (0.217)

-0.211*** (0.064)

-1.001** (0.420)

0.786*** (0.194)

0.008 (0.011)

2.635*** (0.255) 0.012

(0.098) -0.937* (0.485)

-0.617*** (0.216) 0.002

(0.011) -0.024 (0.064) -0.009 (0.030)

9.936*** (0.831) 0.302

(0.394) -2.536***

(0.340) 13.463* (7.203)

9.759*** (0.985)

1.714*** (0.148)

-0.295*** (0.068)

-0.860** (0.427)

0.015 (0.011)

1.360*** (0.216) -0.139 (0.097)

-0.935** (0.419)

0.804*** (0.195)

0.004 (0.011)

1.300*** (0.224)

-0.197*** (0.063)

-0.967** (0.417)

0.763*** (0.189)

0.004 (0.011)

R2 N

0.818 105

0.100 105

0.896 105

0.786 105

0.823 105

0.807 105

Note: Levels measures all variables without taking natural logarithms, first differences, or normalizing. Translog profit function estimates reported in Table A2.2. The choice of profit function specification does not affect qualitative conclusions with respect to the price volatility variables in the other equations in the system.

8

Table A2.4: Alternate Production Function Specifications

Production: qt (Table 1)

Observed at Include Yrs Include Yrs and Yrs2

kt

bt lt

at

Yrs

Yrs2

constant

0.264*** (0.020)

0.076*** (0.022)

0.271*** (0.041) 0.176

(0.125)

-0.002 (0.006)

0.573*** (0.021)

0.043*** (0.016)

0.382*** (0.039)

0.770*** (0.046)

0.0009 (0.003)

0.387*** (0.033)

0.103*** (0.027) 0.134** (0.058)

0.202 (0.161)

-0.398 (0.315)

0.383*** (0.033)

0.097*** (0.028)

0.161*** (0.062)

-5.703 (24.055)

1.502 (6.156) 5.403

(23.494) R2 N

0.606 105

0.903 105

0.627 105

0.630 105

Note: Translog production function estimates reported in Table A2.2. The choice of production function specification does not affect qualitative conclusions with respect to the price volatility variables in the other equations in the system.

9

Table A2.5: Contemporaneous Input Accumulation Determinants

Profit: πt Production: qt

Reproducible Capital: kt+1

Natural Capital: bt+1

Labour: lt+1

Investment Supply: rt

πt-i

qt

kt

bt lt

rt-i

1.060*** (0.064)

0.184 (0.118)

0.423*** (0.032) 0.050** (0.027)

0.302*** (0.064)

-0.095 (0.107)

0.284*** (0.101)

0.347** (0.148) -0.415 (0.273)

0.106 (0.101)

-0.007 (0.051)

0.135*** (0.048)

0.416*** (0.105)

pt

wkt-i

wlt-i

at σpt-i

Bt

B2t

rmktt

constant

1.335*** (0.222)

-0.230*** (0.065)

-1.034** (0.425)

0.800*** (0.200)

0.008 (0.010)

0.919*** (0.181)

0.0001 (0.005)

-0.342*** (0.123) 0.415

(0.810)

-0.005 (0.019)

-0.018 (0.042)

0.229* (0.126) -0.342 (0.810)

0.015 (0.018) 0.286

(0.242) -0.356 (0.303)

-0.101** (0.049)

-0.090 (0.058) 0.014

(0.384)

0.003 (0.009)

-0.024 (0.020)

-0.043** (0.020)

0.840*** (0.112) 0.093** (0.042)

R2 N

0.820 105

0.709 105

0.030 105

0.124 105

0.019 105

0.430 105

Note: In this specification, lag length (i) in the input accumulation equations is set to 0.

10

Table A2.6: System Estimated in Levels

Profit: πt Production: qt Reproducible Capital: kt+1

Natural Capital: bt+1

Labour: lt+1 Investment Supply: rt

πt-i

qt

kt

bt lt

rt-i

0.752*** (0.039)

0.169*** (0.034)

0.444*** (0.024)

0.054*** (0.013)

0.271*** (0.018)

1.006*** (0.043)

0.003*** (0.0001)

1.620*** (0.254) -0.250 (0.297)

-0.002 (0.003)

0.536*** (0.050)

-0.001 (0.001)

2.899 (2.431)

pt

wkt-i

wlt-i

at σpt-i

B2

t

rmktt

constant

0.500*** (0.042)

-0.018** (0.008)

-0.040*** (0.010)

0.592*** (0.062)

-1.090*** (0.116)

0.545*** (0.022)

-0.413*** (0.024)

0.008 (0.006) -0.002 (0.007)

-0.022*** (0.007)

0.133*** (0.033)

-0.107*** (0.016)

0.051*** (0.017)

-0.079*** (0.016) 0.007** (0.004)

-0.010 (0.129)

0.030*** (0.005)

-0.025*** (0.009)

-0.014* (0.008)

0.306*** (0.037)

-3.539*** (0.462)

1.500*** (0.039)

6.712*** (1.423)

R2 N

0.936 105

0.971 105

0.733 104

0.603 104

0.862 104

0.949 105

Note: In this specification all variables are measured relative to the aggregate economy, without taking natural logarithms or first differences.

11

Table A2.7: Alternate Natural Capital Measures

Bt Volume (Table 1)

Bt Value Bt Volume (Alternate Interpolation)

Production: qt

Natural Capital: bt+1

Production: qt

Natural Capital: bt+1

Production: qt

Natural Capital: bt+1

πt-i

qt

kt

bt lt

rt-i

0.420*** (0.031) 0.061** (0.027)

0.291*** (0.063)

0.437*** (0.103)

-0.491** (0.216)

0.135*** (0.048)

0.427*** (0.032) 0.013

(0.034) 0.275*** (0.065)

0.379*** (0.089)

-0.703*** (0.185)

0.099** (0.042)

0.431*** (0.032) 0.026

(0.032) 0.254*** (0.064)

0.184** (0.094) -0.315 (0.195)

0.129*** (0.045)

wkt-i

wlt-i

at σpt-i

Bt

B2t

constant

0.923*** (0.182)

0.001 (0.006)

0.187* (0.102) -0.762 (0.641)

-0.0003 (0.015)

0.781*** (0.145)

-0.943*** (0.180)

-0.115*** (0.036)

0.963*** (0.187)

-0.002 (0.006)

0.139 (0.087) -0.343 (0.544)

-0.012 (0.013)

0.621*** (0.126)

-0.779*** (0.155)

-0.071** (0.031)

0.959*** (0.183)

-0.002 (0.005)

0.141 (0.094) -0.427 (0.573)

-0.006 (0.014)

0.557*** (0.135)

-0.716*** (0.167)

-0.069** (0.033)

R2 N

0.707 105

0.346 103

0.704 105

0.328 103

0.706 105

0.264 103

Note: The choice of natural capital measure does not affect qualitative conclusions with respect to the price volatility variables in the other equations in the system.

12

Table A2.8: Alternate Investment Supply Measures

Investment Supply: rt (Table 1)

Premium over rmktt

Premium over rfreet

Include rfreet

πt-i

0.426*** (0.105)

0.394*** (0.102)

0.422*** (0.106)

0.404*** (0.105)

σpt-i

rmktt

rfreet

constant

-0.042** (0.020)

0.884*** (0.114)

0.091** (0.042)

-0.041** (0.020)

0.084** (0.042)

-0.041** (0.020)

0.909*** (0.114)

0.083** (0.042)

-0.048** (0.020)

0.899*** (0.114) -0.832 (0.719) 0.147** (0.064)

R2 N

0.431 105

0.097 105

0.441 105

0.438 105

Note: The choice of investment supply measure does not affect qualitative conclusions with respect to the price volatility variables in the other equations in the system.

13

Table A2.9: Alternate Opportunity Cost Measures

Forestry-Specific Opportunity Costs Aggregate Opportunity Costs Reproducible

Capital: kt+1

Natural Capital: bt+1

Labour: lt+1

Reproducible Capital: kt+1

Natural Capital: bt+1

Labour: lt+1

πt-i

qt

rt-i

0.700*** (0.039)

0.059* (0.031)

0.427*** (0.104)

-0.510** (0.215) 0.123** (0.048)

0.071** (0.033)

0.131*** (0.027)

0.715*** (0.040)

0.061* (0.032)

0.399** (0.160) -0.172 (0.210)

0.140*** (0.050)

0.086** (0.035)

0.131*** (0.028)

wkt-i

wlt-i σpt-i

Bt

B2t

constant

-0.156*** (0.060) 0.306

(0.204) -0.007 (0.010)

0.0002 (0.023)

0.213** (0.097) 0.300

(0.329) 0.006

(0.015) 0.759*** (0.145)

-0.914*** (0.180)

-0.152*** (0.040)

-0.150*** (0.047) -0.172 (0.170) -0.004 (0.008)

0.002 (0.019)

0.016 (0.036) 0.231

(0.141) -0.005 (0.010)

0.006 (0.020)

-0.100 (0.114) 0.078

(0.234) -0.0005 (0.016)

0.769*** (0.150)

-0.932*** (0.190)

-0.122*** (0.037)

0.066** (0.030) -0.151 (0.119) 0.002

(0.007)

-0.018 (0.015)

R2 N

0.741 104

0.347 103

0.338 103

0.738 104

0.318 103

0.294 103

Note: Aggregate Opportunity Costs are not normalized. The choice of opportunity cost measure in input accumulation functions does not affect qualitative conclusions with respect to the price volatility variables in the other equations in the system.

14

Table A2.10: Alternate Price Volatility Measures

Investment Supply: rt (Table 1)

Relative Std. Dev. (5 Years)

High/Low Volatility Dummies

Normalized by Agricultural Prices

(10 Years) πt-i

0.426*** (0.105)

0.458*** (0.106)

0.448*** (0.104)

0.423*** (0.103)

σpt-i

rmktt

HiVolt

LoVolt

constant

-0.042** (0.020)

0.884*** (0.114)

0.091** (0.042)

-0.027** (0.012)

0.900*** (0.113)

0.071** (0.033)

0.893*** (0.111)

-0.126*** (0.045) -0.032 (0.047) 0.083** (0.042)

-0.018* (0.011)

0.921*** (0.114)

0.041 (0.027)

R2 N

0.431 105

0.433 105

0.447 105

0.431 105

Note: Price volatility is measured in Table 1 using standard deviation in forestry prices over 10 years, relative to standard deviation in GDP deflator. HiVol = 1 when relative price volatility exceeds the 75th percentile; LoVol =1 when relative price volatility falls below the 25th percentile. The choice of price volatility measure does not affect qualitative conclusions with respect to price volatility in the input accumulation equations.

15

Table A2.11: Alternate Error Structures

Panel A: 2SLS Profit: πt Production:

qt

Reproducible Capital: kt+1

Natural Capital: bt+1

Labour: lt+1

Investment Supply: rt

πt-i

qt

kt

bt lt

rt-i

1.098*** (0.069)

0.149 (0.131)

0.441*** (0.033) 0.035

(0.029) 0.226*** (0.069)

0.670*** (0.046)

0.059 (0.037)

0.490*** (0.118)

-0.601** (0.248)

0.188*** (0.058)

0.073** (0.036)

0.129*** (0.028)

0.420*** (0.109)

pt

wkt-i

wlt-i

at σpt-i

Bt

B2t

rmktt

constant

1.213*** (0.246)

-0.266*** (0.071) -0.879* (0.468)

0.861*** (0.224)

0.007 (0.011)

0.976*** (0.199)

-0.001 (0.006)

-0.099 (0.069) -0.220 (0.449)

-0.004 (0.010)

0.006 (0.022)

0.173 (0.117) -0.896 (0.737)

0.011 (0.016)

0.854*** (0.174)

-1.018*** (0.216)

-0.144*** (0.040)

-0.142*** (0.053) -0.235 (0.356)

-0.001 (0.008)

-0.014 (0.017)

-0.037* (0.022)

0.855*** (0.129) 0.083* (0.047)

R2 N

0.823 105

0.707 105

0.745 104

0.352 103

0.319 103

0.433 105

Note: Estimation results reported in Table 1 generated using iterative three-stage GLS.

16

Panel B: Iterative Seemingly Unrelated Regression Profit: πt Production:

qt

Reproducible Capital: kt+1

Natural Capital: bt+1

Labour: lt+1

Investment Supply: rt

πt-i

qt

kt

bt lt

rt-i

1.049*** (0.062)

0.162 (0.111)

0.415*** (0.031) 0.054** (0.027)

0.309*** (0.063)

0.701*** (0.039)

0.064** (0.031)

0.555*** (0.085)

-0.776*** (0.192)

0.129*** (0.048)

0.074** (0.034)

0.123*** (0.027)

0.447*** (0.094)

pt

wkt-i

wlt-i

at σpt-i

Bt

B2t

rmktt

constant

1.304*** (0.212)

-0.217*** (0.064)

-0.993** (0.418)

0.782*** (0.189)

0.008 (0.010)

0.936*** (0.182)

0.0005 (0.006)

-0.167*** (0.060) -0.007 (0.384)

-0.008 (0.010)

0.011 (0.020)

0.249** (0.103) -0.707 (0.653)

-0.0003 (0.015)

0.793*** (0.145)

-0.963*** (0.179)

-0.117*** (0.036)

-0.171*** (0.051) -0.088 (0.336)

-0.0002 (0.007)

-0.017 (0.017)

-0.043** (0.020)

0.874*** (0.114) 0.093** (0.042)

R2 N

0.820 105

0.706 105

0.739 104

0.327 103

0.314 103

0.428 105

17

Table A2.12: Alternate Identification of Crisis and Calm Episodes

Investment Split Sample Supply: rt

(Table 3) Crisis Calm Interwar/1990s 1900s/Interwar/

1990s πt-i

0.442*** (0.101)

0.317* (0.173)

0.547*** (0.117)

0.437*** (0.099)

0.442*** (0.100)

σpt-i x Crisis

σpt-i x Calm

rmktt

constant

-0.050*** (0.019) 0.009

(0.025) 0.854*** (0.110) 0.047

(0.043)

-0.059** (0.026)

0.949*** (0.171) 0.059

(0.062)

0.009 (0.026)

0.643*** (0.136) 0.063

(0.052)

-0.064*** (0.020) 0.0001 (0.023)

0.822*** (0.110) 0.051

(0.042)

-0.046** (0.019) 0.015

(0.026) 0.864*** (0.109) 0.029

(0.045) R2 N

0.474 105

0.550 105

0.381 105

0.486 105

0.471 105

Note: Crisis dates employed in Table 3: 1900-1908, 1918-1931, 1960-1973, 1992-1998. The choice of crisis dates does not affect qualitative conclusions with respect to asymmetry in the input accumulation equations.

18

3. Data Note: All data described in this appendix is available in file “NRCdata3.xls/rawdata”.

Urquhart refers to M. C. Urquhart (1993), Gross National Product, Canada, 1870- 1926: The Derivation of the Estimates, McGill-Queen’s Press.

HS1 refers to K.A.H. Buckley and M.C. Urquhart (Eds.) (1964), Historical Statistics of Canada, 1st Edition, Macmillan Press.

HS2 refers to F.H. Leacy (Ed.) (1983), Historical Statistics of Canada, 2nd Edition, Statistics Canada.

USHS refers to Bureau of the Census (1975), Historical Statistics of the United States: Colonial Times to 1970, Bicentennial Edition, U.S. Department of Commerce. Cansim refers to “http://dc1.chass.utoronto.ca/cansim/”.

Estat refers to “http://estat.statcan.ca/”.

3.1 Canadian and International Macro Variables Nominal GNP: 1900-26 = Urquhart Table 1.6, GNP at market prices

1927-60 = HS1 E12, GNP at market prices 1961-99 = Cansim D16466, GNP at market prices

Aggregate WLL: 1927-60 = HS1 E1, wages salaries and supplementary labour income

1961-99 = Estat Table 3800016, wages and salaries Nominal Manufacturing VA: 1900-26 = Urquhart Table 1.1, manufacturing GDP at

factor cost 1927-69 = HS2 F60, manufacturing GDP at factor cost 1970-97 = Cansim I193505, manufacturing GDP at factor

cost 1998-99 = Cansim I600105, converted to nominal using

GNP deflator Nominal Agriculture VA: 1900-26 = Urquhart Table 1.1, agriculture GDP at

factor cost 1927-76 = HS2 F56, agriculture GDP at factor cost 1977-97 = Cansim I195501, agriculture GDP at factor

cost 1998-99 = Cansim V3859617, crop and animal production

GDP at market prices Nominal Construction VA: 1900-26 = Urquhart Table 1.1, construction GDP at

factor cost 1927-76 = HS2 F61, construction GDP at factor cost 1977-99 = Estat Table 3790023, construction GDP at

19

current prices Nominal Transportation VA: 1900-26 = Urquhart Table 1.1, transportation GDP at

factor cost 1927-76 = HS2 F62+F63, transportation and storage GDP

at factor cost 1977-99 = Estat Table 3790023, transportation and

warehousing GDP at current prices Nominal Communication VA: 1900-26 = Urquhart Table 1.1, communication GDP at

factor cost 1927-76 = HS2 F64, communication GDP at factor cost 1977-99 = Estat Table 3790023, information and culture

GDP at current prices Nominal Finance VA: 1900-26 = Urquhart Table 1.1, banking and finance GDP

at factor cost 1927-76 = HS2 F68, finance, insurance and real estate

GDP at factor cost 1977-99 = Estat Table 3790023, finance, insurance and

real estate GDP at current prices Population: 1900-26 = Urquhart Table 1.6, estimated total population

1927-60 = HS1 A1, estimated total population 1961-71 = Cansim D892580, estimated total population 1972-99 = Cansim C892268, estimated total population

Labour Force: 1901, 1911, 1921 = HS2 N2, civilian labour force over 14 years of age 1921-60 = HS2 N127, noninstitutional civilian labour force over 14 years 1960-75 = HS2 N137, noninstitutional civilian labour force over 14 years 1975-99 = Estat Table 2820008, noninstitutional civilian labour force over

15 years Manufacturing L: 1900, 1905, 1910, 1917-59 = HS1 Q2, total # employees

1960-76 = HS2 R9, total activity # employees 1977-83 = Cansim D700115, total activity # employees 1984-87 = Cansim D662150, total activity # employees 1988-99 = Cansim D968026, total activity # employees

Agriculture L: 1901, 1911 = HS2 D5, total employment agricultural pursuits 1921-60 = HS2 D131, total civilian employment 1961-75 = HS2 D140, total civilian employment

1976-99 = Estat Table 2820008, noninstitutional civilian labour force over 15 years of age

Construction L: 1911 = HS2 D50, total work force 1921-61 = HS2 D534, employment index 1961-83 = Cansim 01432, employment index

1983-99 = Estat Table 2810005, employment index Transportation L: 1900-21 = Urquhart Table 6.8, total # employees 1921-61 = HS2 D535, employment index 1961-83 = Cansim 01432, employment index

1983-99 = Estat Table 2810005, employment index Finance L: 1911, 1921 = HS2 D62, work force finance/insurance/real estate 1921-61 = HS2 D538, employment index 1961-83 = Cansim 01432, employment index

20

1983-99 = Estat Table 2810005, employment index Manufacturing WLL: 1900-26 = Urquhart (1993) Table 4.6, wages and salaries

1927-75 = HS2 R10 and R22, wages and salaries 1976-82 = Estat Table 3010002, total activity wages and salaries 1983-97 = Estat Table 3010001, total activity wages and salaries 1998-99 = Estat Table 3010003, total activity wages and salaries

Agriculture WLL: 1926-95 = Cansim D11801, wages and salaries 1996-99 = StatsCan # 13-502, wages and salaries agriculture and

fishing – WLL fishing (all levels) 3.2 Prices and Wages GNP Deflator: 1900-26 = Urquhart Table 1.6, implicit GNE deflator at market prices

1927-60 = HS1 J153, implicit GNE deflator at market prices 1961-99 = Cansim D23203, implicit GDP deflator at market prices

US GNP Deflator: 1900-75 = USHS F5, implicit GNP deflator 1975-99 = Budget of US Government, Historical Table 10.1 Nominal Interest Rate: 1900-94 = McInnis/Queen's University Social Science Data

Centre, government of Canada bond yields average 3-5 year

1995-99 = Cansim B14003, government of Canada bond yields average 10 year

Capital Cost Deflator: 1900-25 = HS2 K39, WPI iron and its products 1926-75 = HS2 K164, implicit price index for manufacturing

industries gross fixed capital stock 1976-99 = Cansim D23192, implicit price index for business gross

fixed capital stock CPI: 1900, 1905, 1909-13 = Emery and Levitt (2002, Table 2b), Toronto 1913-75 = HS2 K8, national 1975-99 = Estat Table 3260002, national Manufacturing WPI: 1900-75 = HS2 K33, excluding gold

1976-99 = Estat Table 3290001, manufacturing industry product price index

Agriculture WPI: 1900-74 = HS2 K49, total farm products 1974-99 = Estat Table 0020022 Services WPI: 1900-99 = (GNP Deflator – (Agriculture WPI x Agriculture Share GNP) –

(Manufacturing WPI x Manufacturing Share GNP) – (4 Sector WPI x Natural Resource Share GNP)) / Services Share GNP

Wood WPI: 1900-55 = HS2 K38, wood and its products 1956-99 = Estat Table 3290001, wood industry price index

Mining WPI: 1900-61 = HS2 K40, non-ferrous metals excluding gold 1962-99 = Estat Table 3290001, primary metals price index

Energy WPI: 1900-13 = HS2 K42, non-metallic minerals 1913-52 = Statscan # 62-501, petroleum and its products 1952-56 = HS2 K42, non-metallic minerals 1956-99 = Estat Table 3290001, petroleum and coal products

Fish WPI: 1900-43 = HS1 J55, fisheries products 1943-81 = StatsCan # 62-501, fisheries products

21

1981-99 = Estat Table 3290040, fisheries products US Wood WPI: 1900-26 = USHS E48, building materials

1926-70 = USHS E32, lumber and wood products 1970-99 = US Statistical Abstract, PPI

US Mining WPI: 1900-51 = USHS E47, metals and metal products 1951-70 = USHS E34 1970-99 = US Statistical Abstract, PPI

US Energy WPI: 1900-51 = USHS E46, fuel and lighting 1951-70 = USHS E29, fuel and related products 1970-99 = US Statistical Abstract, PPI

US Fish WPI: 1900-35 = USHS E43, foods 1935-70 = USHS E141, CPI fish 1970-99 = US Statistical Abstract, PPI fin and shell fish General Wage Index: 1900-65 = HS2 E198 1965-72 = HS2 E209 1972-83 = Estat Table 2810021, average weekly earnings 1983-99 = Estat Table 2810008 Logging Wage Index: 1900-65 = HS2 E199 1965-83 = Estat Table 2810022 Wood and Forest Products Wage Index: 1983-99 = Estat Table 2810008 Coal Mining Wage Index: 1900-65 = HS2 E200 Petroleum and Coal Products Wage Index: 1961-83 = Estat Table 2810022 1983-99 = Estat Table 2810008 Metal Mining Wage Index: 1900-65 = HS2 E201 Mining Wage Index: 1961-83 = Estat Table 2810022, all mining 1983-99 = Estat Table 2810008 Manufacturing Wage Index: 1900-10 = HS2 E205, construction

1911-65 = HS2 E202, all manufacturing 3.3 Equity Prices TSE Composite: 1900-14 = Rosenbluth (accessed April 20, 2005:

http://www.arts.ubc.ca/econsochist) 1914-56 = HS2 J494, total (excluding mines)

monthly average closing prices 1956-77 = HS2 J481, TSE 300 Composite,

December closing prices 1977-99 = TSE Annual Report, December closing

prices US S&P Composite: 1900-99 = USHS2 CJ800 Industrials Equity Price Index: 1900-14 = Prices and Price Indices, Vol. 2, Pg. 609 1914-77 = HS2 J482, J491 1977-99 = TSE Annual Report, Industrial Products Energy Equity Price Index: 1900-14 = Annual Financial Review (by firm), weighted by

1926 share of total capitalized value 1914-52 = DBS Prices and Price Indices, oils annual

average 1952-99 = TSE Annual Report, energy December closing

22

prices Forestry Equity Price Index: 1900-14 = Annual Financial Review (by firm), weighted by

1926 share of total capitalized value 1914-52 = DBS Prices and Price Indices, pulp and paper

annual average 1952-99 = TSE Annual Report, paper and forest products

December closing prices Mining Equity Price Index: 1900-14 = Annual Financial Review (by firm), weighted by

1926 share of total capitalized value 1914-52 = DBS Prices and Price Indices, mines annual

average 1952-99 = TSE Annual Report, industrial and metal mines

December closing prices 3.4 Timber Stock and Climate Average Temperature: 1900-99 = US National Cimate Data Center, annual average temperature, contiguous US (accessed November 16, 2009: http://climvis.ncdc.noaa.gov/cgi-bin/cag3/hr- display3.pl) Average Precipitation: 1900-99 = US National Climate Data Center, annual average total precipitation, contiguous US (accessed November 16, 2009: http://climvis.ncdc.noaa.gov/cgi-bin/cag3/hr- display3.pl) Improved Acres: 1901-71 = HS1 L12 Seeded Acres: 1901 = HS1 L125-137 (by crop) 1908-99 = Estat Table 0010017 Timber Assets # 1: 1900-11 = OLS out-of-sample prediction (t=1921-61)=f(wood wpi/GNP deflator, VA index, forestry TFP index, yrs,

yrs2) 1911-21 = Index based on BC Ministry of Forestry Annual Reports, timber lands eligible for forest protection tax (acres), scaled up by BC share lumber volume 1921-61 = StatsCan # 25-202, Canadian Forestry Statistics, total

economically accessible productive timber assets (ft3) 1961-99 = Estat Table 1530029, nonreserved economically

accessible opening stock (m3) Timber Assets # 2: 1900-61 = Index based on Timber Assets # 1, scaled by Wood WPI / GNP Deflator

1961-99 = Cansim Table 3780005, value tangible, non-produced timber assets (000 000 1900 CAD)

Lumber Export Value: 1900-15 = Wood Products and Paper, HS1 F256 1916-17 = Linear Interpolation 1918-25 = HS1 F366 1926-60 = HS1 F302 1961-62 = HS2 L184 (Paper) + L145 (Lumber) + L118 (Primary Wood Products) 1963-98 = Estat Table 2260001, Crude + Primary + Paper

23

1999 = Estat Table 2290003 Total Lumber Volume:1900-08=Lumber, Value of Production Deflated by Wood WPI 1908-75=HS2 L139, Volume Total Production 1976-99=Estat Table 3030009, Sawn Lumber Total Volume Softwood Volume: 1900, 1902-07 = Predicted (t=1901, 1908-20) = 25060.06xyrs - 65563.27xyrssqu + 0.91215xtotalvolume - 0.0828471xbcvolume + 28.69476xww1dum + 0.0037454xexportvalue - 23900000 1901 = Softwood Volume Share, Census Vol. 2 x Total Volume 1908-99 = Total-HW Hardwood Volume: 1900-07 = Total Volume - Softwood Volume 1908-75 = HS2 L138, Total Volume Hardwood 1975-84 = StatsCan #25-202 1985-99 = Estat Table 3030009, Share Non-Coniferous BC Lumber Volume: 1900, 1902-07 = Predicted (t=1901, 1908-20) = 1770.521xyrs - 4179.483xyrssqu + 0.3091133xtotalvolume - 93.60529xww1dum + 0.0984664xbcnatresrevenue - 0.0003251xtotalexportvalue - 8.948931xbcpop - 1854335 1901 = Share BC Lumber Value from 1901 Census, Vol. 3 x Total Volume 1908-46 = Volume BC Lumber Production, provided by RC Allen 1946-99 = Estat Table 3030009, Sawn Lumber Volume, BC 3.5 Woods Operations L: 1901, 1911, 1921 = Census of Canada, forestry all occupations

1926-59 = HS1 K119, man years 1960-64 = HS2 L129, man years 1965-75 = HS2 L126, total activity # employees 1976-89 = Statscan # 25-202, logging industry total activity # employees 1990-99 = Estat Table 3010004, logging industry total activity # employees

WLL: 1900-25 = Urquhart 1993 Chap. 3, total wage bill 1926-59 = HS1 K120, salaries and wages 1960-64 = HS2 L130, salaries and wages 1965-75 = HS2 L127, total activity salaries and wages 1976-89 = Statscan # 25-202, logging industry total activity salaries and wages 1990-99 = Estat Table 3010004, logging industry total activity salaries and

wages WMM: 1900-25 = gross value production-GDP

1926-59 = HS1 K121, cost materials 1960-64 = HS2 L131, cost materials 1965-75 = HS2 L124-L125, value shipments-value added 1976-89 = Statscan # 25-202, logging industry logging activity value shipments-

value added 1990-99 = Estat Table 3010004, logging industry logging activity value

shipments-value added

24

VA: 1900-25 = Urquhart 1993 Table 1.1, non-farm forestry GNP 1926-59 = HS1, net value production 1960-64 = HS2 L132, net value production 1965-75 = HS2 L125, logging activity value added 1976-89 = Statscan # 25-202, logging industry logging activity value added 1990-99 = Estat Table 3010004, logging industry logging activity value added

PQ: 1900-25 = Urquhart 1993, Table 3.3 x Table 3.4 1926-59 = HS1 K123, gross value production 1960-64 = HS2 L133, gross value production 1965-75 = HS2 L124, logging activity value shipments 1976-89 = Statscan # 25-202, logging industry logging activity value shipments 1990-99 = Estat Table 3010004, logging industry logging activity value

shipments 3.6 Lumber Industry Establishments: 1900, 1905, 1910, 1915 = Canada Year Book, # establishments

1917-59 = HS1 K139, # establishments 1960-75 = HS2 L149, # establishments 1976-82 = Estat Table 3010002, sawmill manufacturing activity #

establishments 1983-97 = Estat Table 3010001, manufacturing activity #

establishments 1998-99 = Estat Table 3010003, manufacturing activity #

establishments L: 1900, 1905, 1910, 1915 = Canada Year Book, # employees

1917-59 = HS1 K140, # employees 1960-75 = HS2 L156, total activity # employees 1976-82 = Estat Table 3010002, sawmill total activity # employees 1983-97 = Estat Table 3010001, total activity # employees 1988-99 = Estat Table 3010003, total activity # employees

WLL: 1900, 1905, 1910, 1915 = Canada Year Book, salaries and wages 1917-59 = HS1 K141, salaries and wages 1960-75 = HS2 L157, total activity salaries and wages 1976-82 = Estat Table 3010002, sawmill total activity salaries and wages 1983-97 = Estat Table 3010001, total activity salaries and wages 1998-99 = Estat Table 3010003, total activity salaries and wages

WFF: 1918-20, 1924-59 = HS1 K142, cost fuel and electricity WMM: 1910, 1915 = Canada Year Book, cost materials

1917-59 = HS1 K143, cost materials 1960-75 = HS2 L154-L155, manufacturing activity value shipments-value added 1976-82 = Estat Table 3010002, sawmill manufacturing activity value shipments-

value added 1983-97 = Estat Table 3010001, manufacturing activity value shipments-value

added 1998-99 = Estat Table 3010003, manufacturing activity value shipments-value

added VA: 1918-20, 1924-59 = HS1 K143, net value production

25

1960-75 = HS2 L155, manufacturing activity value added 1976-82 = Estat Table 3010002, sawmill manufacturing activity value added 1983-97 = Estat Table 3010001, manufacturing activity value added 1998-99 = Estat Table 3010003, manufacturing activity value added

PQ: 1900, 1905, 1910, 1915 = Canada Year Book, gross value production 1917-59 = HS1 K145, gross value production 1960-75 = HS2 L154, manufacturing activity value shipments 1976-82 = Estat Table 3010002, sawmill manufacturing activity value shipments 1983-97 = Estat Table 3010001, manufacturing activity value shipments 1998-99 = Estat Table 3010003, manufacturing activity value shipments

3.7 Pulp and Paper Industry Establishments: 1900, 1905, 1910, 1915, 1917-18 = Canada Year Book, # paper

mills 1919-59 = HS1 K169, # establishments 1960-75 = HS2 L189, pulp and paper mills # establishments 1976-82 = Estat Table 3010002, # establishments 1983-97 = Estat Table 3010001, # establishments 1998-99 = Estat Table 3010003, # establishments

L: 1900, 1905, 1910, 1915, 1917-18 = Canada Year Book, paper mills, # employees

1919-59 = HS1 K170, # employees 1960-75 = HS2 L196, pulp and paper mills total activity # employees 1976-82 = Estat Table 3010002, total activity # employees 1983-97 = Estat Table 3010001, total activity # employees 1988-99 = Estat Table 3010003, total activity # employees

WLL: 1900, 1905, 1910, 1915, 1917-18 = Canada Year Book, paper mills, salaries and wages

1919-59 = HS1 K171, salaries and wages 1960-75 = HS2 L197, pulp and paper mills total activity salaries and wages 1976-82 = Estat Table 3010002, total activity salaries and wages 1983-97 = Estat Table 3010001, total activity salaries and wages 1998-99 = Estat Table 3010003, total activity salaries and wages

WFF: 1919-59 = HS1 K172, cost fuel and electricity WMM: 1910, 1915, 1917-18 = Canada Year Book, paper mills, cost materials

1919-59 = HS1 K173, cost materials 1960-75 = HS2 L194-L195, pulp and paper mills manufacturing activity value

shipments-value added 1976-82 = Estat Table 3010002, manufacturing activity value shipments-value

added 1983-97 = Estat Table 3010001, manufacturing activity value shipments-value

added 1998-99 = Estat Table 3010003, manufacturing activity value shipments-value

added VA: 1919-59 = HS1 K174, net value production

1960-75 = HS2 L195, pulp and paper mills manufacturing activity value added 1976-82 = Estat Table 3010002, manufacturing activity value added

26

1983-97 = Estat Table 3010001, manufacturing activity value added 1998-99 = Estat Table 3010003, manufacturing activity value added

PQ: 1900, 1905, 1910, 1915, 1917-18 = Canada Year Book, paper mills, gross value production

1919-59 = HS1 K175, gross value production 1960-75 = HS2 L194, pulp and paper mills manufacturing activity value

shipments 1976-82 = Estat Table 3010002, manufacturing activity value shipments 1983-97 = Estat Table 3010001, manufacturing activity value shipments 1998-99 = Estat Table 3010003, manufacturing activity value shipments

3.8 Wood Products Manufacturing Industries Establishments: 1905, 1917-59 = HS1 Q72, # establishments

1960-75 = HS2 R281, manufacturing activity # establishments 1976-82 = Estat Table 3010002, manufacturing activity #

establishments 1983-97 = Estat Table 3010001, manufacturing activity #

establishments 1998-99 = Estat Table 3010003, manufacturing activity #

establishments L: 1900, 1905, 1910, 1917-59 = HS1 Q73, # employees

1960-75 = HS2 R289, total activity # employees 1976-82 = Estat Table 3010002, total activity # employees 1983-97 = Estat Table 3010001, total activity # employees 1988-99 = Estat Table 3010003, total activity # employees

WLL: 1900-25 = Urquhart 1993 Table 4.6, salaries and wages 1900, 1905, 1910, 1917-59 = HS1 Q74, salaries and wages 1960-75 = HS2 R290, total activity salaries and wages 1976-82 = Estat Table 3010002, total activity salaries and wages 1983-97 = Estat Table 3010001, total activity salaries and wages 1998-99 = Estat Table 3010003, total activity salaries and wages

WMM: 1900-25 = gross value production-GDP 1900, 1910, 1917-59 = HS1 Q75-Q77, gross value production-net value

production 1960-75 = HS2 R287-R288, manufacturing activity value shipments-value added 1976-82 = Estat Table 3010002, manufacturing activity value shipments-value

added 1983-97 = Estat Table 3010001, manufacturing activity value shipments-value

added 1998-99 = Estat Table 3010003, manufacturing activity value shipments-value

added VA: 1900-25 = Urquhart 1993 Table 4.5, GDP

1900, 1910, 1917-59 = HS1 Q77, value added by manufacture 1960-75 = HS2 R288, manufacturing activity value added 1976-82 = Estat Table 3010002, manufacturing activity value added 1983-97 = Estat Table 3010001, manufacturing activity value added 1998-99 = Estat Table 3010003, manufacturing activity value added

27

PQ: 1900-25 = Urquhart 1993 Table 4.1, gross value production 1900, 1905, 1910, 1917-58 = HS1 Q75, gross value production 1959-75 = HS2 R289, manufacturing activity value shipments 1976-82 = Estat Table 3010002, manufacturing activity value shipments 1983-97 = Estat Table 3010001, manufacturing activity value shipments 1998-99 = Estat Table 3010003, manufacturing activity value shipments

3.9 Paper and Allied Products Manufacturing Industries Establishments: 1905, 1917-59 = HS1 Q78, # establishments

1960-75 = HS2 R309, manufacturing activity # establishments 1976-82 = Estat Table 3010002, manufacturing activity #

establishments 1983-97 = Estat Table 3010001, manufacturing activity #

establishments 1998-99 = Estat Table 3010003, manufacturing activity #

establishments L: 1900, 1905, 1910, 1917-59 = HS1 Q79, # employees

1960-75 = HS2 R317, total activity # employees 1976-82 = Estat Table 3010002, total activity # employees 1983-97 = Estat Table 3010001, total activity # employees 1988-99 = Estat Table 3010003, total activity # employees

WLL: 1900-25 = Urquhart 1993 Table 4.6, salaries and wages 1900, 1905, 1910, 1917-59 = HS1 Q80, salaries and wages 1960-75 = HS2 R318, total activity salaries and wages 1976-82 = Estat Table 3010002, total activity salaries and wages 1983-97 = Estat Table 3010001, total activity salaries and wages 1998-99 = Estat Table 3010003, total activity salaries and wages

WMM: 1900-25 = gross value production-GDP 1900, 1910, 1917-59 = HS1 Q81-Q83, gross value production-net value

production 1960-75 = HS2 R315-R316, manufacturing activity value shipments-value added 1976-82 = Estat Table 3010002, manufacturing activity value shipments-value

added 1983-97 = Estat Table 3010001, manufacturing activity value shipments-value

added 1998-99 = Estat Table 3010003, manufacturing activity value shipments-value

added VA: 1900-25 = Urquhart 1993 Table 4.5, GDP

1900, 1910, 1917-59 = HS1 Q83, value added by manufacture 1960-75 = HS2 R316, manufacturing activity value added 1976-82 = Estat Table 3010002, manufacturing activity value added 1983-97 = Estat Table 3010001, manufacturing activity value added 1998-99 = Estat Table 3010003, manufacturing activity value added

PQ: 1900-25 = Urquhart 1993 Table 4.1, gross value production 1900, 1905, 1910, 1917-58 = HS1 Q81, gross value production 1959-75 = HS2 R315, manufacturing activity value shipments 1976-82 = Estat Table 3010002, manufacturing activity value shipments

28

1983-97 = Estat Table 3010001, manufacturing activity value shipments 1998-99 = Estat Table 3010003, manufacturing activity value shipments