This grant is to support a dissertation project. The purpose of the project is to develop and analyze a dynamic structural model of investment behavior using data on the timber purchase and harvest decisions of wood products firms in the Pacific Northwest. The project has three goals: first, to better understand the determinants of firm investment, particularly the effects of uncertainty, and asymmetric adjustment costs; second, to extend the rapidly growing literature on methods of solving and estimating models of this type; and finally, to further enlighten the policy discussion now taking place about the relative importance of environmental and economic factors in the future use of forest lands. A tractable econometric model will be derived which is closely connected to theory and which incorporates important features of the industry. A rich and extensive data set will then be used to estimate the model and recover structural parameters.
