Profit Efficiency in Norwegian Timber Supply: A Stochastic Frontier Function for Active NIPFs

The primary objective of the paper was to analyse how marginalisation affects profit efficiency, a secondary to identify and analyse some other possible inefficiency factors. In order to do this we estimated a translog restricted profit frontier function with an integrated inefficiency module. An unbalanced panel of 2161 observations of active Norwegian forest owners over the years 1991-2004 was used. The more marginal forestry income becomes the forest owner. Efficiency differences are likely to be caused by different information levels. The average forest owner could potentially increase his profit by 7.7% by catching up with the front. We suggest lease contracts as a policy means to ensure efficient timber supply with requiring much attention from the forest owner.