The demand for paper and paperboard: econometric models for the European Union

Abstract

Cost minimization theory suggests national demand equations for paper and paperboard in which demand is a negative function of the price of paper and paperboard, and a positive function of gross national product. A dynamic version of this model was estimated with data from European Union countries, for newsprint, printing and writing paper, and other paper and paperboard. Country-by-country equations proved unstable. Pooling the data across countries, with dummy variables to account for fixed country effects, led to well defined short-term and long-term elasticities with respect to price and gross national product. The hypothesis that income and price elasticities were the same across the European Union countries could not be rejected at the 1% significance level, for the three product groups. From 1969 to 1995, most of the growth in demand had been due to the growth in national product, while price increases had only a small negative effect.