A stochastic production frontier analysis of Polish State Forests

This article presents a study of the efficiency of Polish state timber production and management polices following the transition to a more competitive market. The objective is to determine how well the Polish State Forests, which manage 80% of Poland's forestland and supply 85% of its timber, have adjusted, after 40 yr of central planning, to this change. The development and estimation of a stochastic frontier production function is used to analyze and evaluate the efficiency of timber production and the effectiveness of management policies. The empirical results provide evidence for the presence of substantial technical inefficiency, along with some scale economies in timber production. In addition, policies that have led to the creation of smaller forest districts, employment reductions, and logging equipment purchases are largely ineffective and perhaps even counterproductive. On the other hand, a strong support is provided for the continued privatization of forest operations.