Price and Welfare Effects of Catastrophic Forest Damage from Southern Pine Beetle Epidemics
Southern pine beetle (Dendroctonus frontalis) epidemics are periodically responsible for catastrophic levels of mortality to southern yellow pine forests. Traditional forest damage appraisal techniques developed for site specific economic analysis are theoretically weak since they do not consider aggregate impacts across ecosystems and related markets. Because the traditional model estimates losses only to producers with damaged forests, it provides misleading information from a distributional standpoint by ignoring impacts on producers with undamaged forests and timber consumers. An economic model of timber supply and demand is introduced and used to develop a new technique for estimating short-run market level impacts of catastrophic forest damages. The ' hypothesis that catastrophic disruption of forest ecosystem production has no effect on timber markets is tested using intervention analysis and data on the recent Texas-Louisiana epidemic. Parameter estimates are used to compute short-run changes in economic welfare for producers on damaged forests, producers on undamaged forests, and timber consumers. Principal findings are: (1) changes in social welfare resulting from catastrophic damage to standing timber across forest ecosystems requires market-level analysis, and (2) the net change in economic welfare resulting from insect epidemics is unambiguously negative.