Forest sector models for tropical countries - A case study of Colombia

The evolution of Forest Sector Models (FSMs) since the 1960s has marked a significant advancement in forest economics and policy analysis. However, this development is limited to North America and Europe's nations; tropical countries, crucial for biodiversity, carbon storage, and deforestation, face a notable scarcity of FSMs, often attributed to the limited and fragmented nature of their forest sector data. The importance of unprocessed wood and sources of wood supply are also distinct in tropical countries. We address these issues by introducing a comprehensive framework to build FSMs tailored for tropical countries whose national accounts are aligned with United Nations standards. We demonstrate the applicability of our framework by constructing the Colombian Forest Sector Model (CFSM), a structural econometric partial equilibrium model. The CFSM includes five markets grouped in two market sub-models: one for unprocessed wood (firewood and industrial wood) linked to a forest plantations simulator, and other for manufactured wood products (wood, furniture, and pulp & paper). The model consists of 32 behavioral equations, explaining supply, consumption, exports and imports, and prices for consumption and trade for each market, plus 18 summation and market-clearing identities. Model estimation is based on 41 years (1975–2015) of data collected, organized, and transformed through a meticulous process. Rigorous validation confirms the CFSM's robustness and reliability. The model's application is demonstrated by estimating wood availability and impacts under several plantation expansion scenarios, and the monetary effects of expanding Colombia's wood products industry. The paper opens new frontiers of research in FSMs.