proprietors’ capital are assumed to be fixed by sector and are fixed in total for the region.
Investment does not feed into the capital stock, and no technical change is assumed.
General equilibrium adjustments to federal log shocks are estimated using the above
assumptions about the labor adjustment process. In the short-run, unemployed labor is assumed
to remain in the region and draw unemployment compensation. In the intermediate-run,
unemployment compensation is assumed to be exhausted and unemployed labor is assumed to
leave the region. In a variant of the intermediate-run results, the national price of logs and wood
products is assumed to change in response changes in Forest Service timber policy across the
West.
Table 2 summarizes the main differences in assumptions between the three modeling
scenarios. In the short-run scenario, labor’s wage, the level of investment and the quantity of
capital are fixed. Total regional employment, returns to capital, and the level of net financial
inflows adjust to maintain equilibrium (Table 2). Unemployed labor remains in the region and
draws unemployment compensation in the form of a government income transfer from outside the
region. In the intermediate-run scenario, the outside transfer of unemployment compensation is
lost and the unemployed labor is assumed to leave the region (Table 2) in search of other
employment. In the national price effect scenario, both log and wood product prices are
assumed to increase at the national level as the result of reductions in Federal log supply across
the West. Unemployment compensation transfers are assumed to be zero.
All three CGE model specifications feature endogenously determined output,
consumption, imports, exports, and regional commodity prices. In all three CGE formulations,
sectoral capital (i.e., “corporate and proprietors”) is assumed to remain fixed at baseline levels.