Federal Timber Restrictions and Interregional Arbitrage in U.S. Lumber

Harvesting restrictions to protect the habitat of the northern spotted owl on federal forests in the Pacific Northwest (PNW) substan- tially reduced timber available for processing by the forest products industry. We consider the ex- tent to which these restrictions may have altered the degree of integration of the PNW and U.S. South in a national market for lumber. Descrip- tive statistics and econometric analysis of monthly price data suggest that a structural break occurred in the relationship between the two re- gions' product prices around the time of the har- vest restrictions leading to a more integrated market after the restrictions were imposed. (JEL Q23)