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Title: Finnish wood purchasing cartel: Damage estimates on pulpwood based on the VECM approach Authors:  Leena Kalliovirta - Natural Resources Institute Finland (Finland) [presenting]
Riitta Hanninen - Natural Resources Institute Finland (Finland)
Abstract: Cartel effects in the highly persistent pulpwood prices in Finland are estimated by employing publicly available monthly data and the vector error correction approach (VECM). We generalize the before-and-after comparator-based approach into the nonstationary setting and show that the dummy variable approach yields a reliable estimate of the cartel damage even if the data is nonstationary. Further, the approach allows us to study the existence of a transition period after the cartel. We estimate a large economic model and its statistically sufficient sub-models to depict the pulpwood markets and compute the but-for prices implied by these VEC models. While operational the purchasing cartel was able to generate a price lowering deterministic trend in the pulpwood markets. During the cartel period, the economic model implies that the monthly prices were decreasing by 0.88\% (birch), 0.50\% (spruce), and 1.0\% (pine) whereas the conservative, statistically adequate sub-models imply slower decreases. Thus, the damage accumulated along the duration of the cartel and the average but-for prices were between 12\% to 52\% (birch), 4\% to 26\% (spruce), and 18\% to 63\% (pine) higher than the observed prices.