reindeer husbandry, the swedish market for reindeer meat, and the chernobyl effects

Agricultural Economics 26 (2001) 217–226

Reindeer husbandry, the Swedish market for reindeer meat,and the Chernobyl effects

Göran Bostedt∗Department of Forest Economics, Swedish University of Agricultural Sciences, S-901 83 Umeå, Sweden

Received 5 November 1999; received in revised form 17 August 2000; accepted 13 October 2000

Abstract

Reindeer husbandry is a cornerstone in the culture of the Sami, northern Scandinavia’s indigenous people. This paperpresents a dynamic, theoretical model of the Swedish reindeer husbandry and the market for reindeer meat, as well aseconometric results based on three-stage least squares regression on annual data. The most striking feature of the empiricalresults is a “backward-sloping” supply function, which is consistent with the theoretical model. The results also show effectsof the Chernobyl accident. Prevailing winds at the time of the accident carried radioactive fallout over the grazing areas for theSwedish reindeer husbandry, causing effects on both supply and demand. © 2001 Elsevier Science B.V. All rights reserved.

Keywords: Reindeer husbandry; Demand/supply analysis; Three-stage least squares; Chernobyl effects

1. Introduction

Reindeer husbandry in Sweden is an exclusiveright for the Sami, northern Scandinavia’s indige-nous people. The reindeer (Rangifer tarandus) hasbeen domesticated by the Sami for at least as longas there is written evidence (the oldest documentsare from about 880a.d.). Today (1998) there arearound 230,000 reindeer in Sweden, owned by about4600 reindeer herders (including approximately 1000concession reindeer herders who, by special gov-ernment permit, practice reindeer husbandry outsidethe traditional reindeer herding area) who all belongto one of the 51 Swedish Sami villages (StatisticsSweden, 1999; Riksdagens Revisorer, 1995–1996:8).Reindeer husbandry today is a modern businessgeared mainly towards meat production, and ad-

∗ Tel.: +46-90-786-97-32; fax:+46-90-786-60-73.E-mail address: [email protected] (G. Bostedt).

ministered through family companies formed by thereindeer herders. However, even though the reindeerherders of today use modern equipment like snow-mobiles and mobile slaughterhouses, the basics ofreindeer husbandry have changed fairly little overthe centuries. The reindeer are allowed, with someexceptions, to follow their yearly cycle and searcharound for natural grazing grounds, allowing graz-ing grounds to replenish themselves as the reindeermove from the high mountains to the coast and backagain. This means that reindeer husbandry requireslarge areas. The Reindeer Husbandry Act gives theSami the right to let their reindeer graze on, for in-stance, private forest land. In total, the Sami havegrazing rights on about 40% of the Swedish landarea.

Even if a minority of the about 20,000 SwedishSami (the total number depends on how the ethnicgroup is defined) today are active reindeer herders,the importance of the reindeer husbandry for the Sami

0169-5150/01/$ – see front matter © 2001 Elsevier Science B.V. All rights reserved.PII: S0169-5150(00)00121-3

218 G. Bostedt / Agricultural Economics 26 (2001) 217–226

culture can hardly be overemphasized (RiksdagensRevisorer, 1995–1996:8). Most Sami have familymembers or other relatives who are reindeer own-ers, making the reindeer an integral part of the Samiway of life. Despite low profitability, many reindeerowners are also reluctant to give up reindeer hus-bandry altogether and maintain small herds that arecompatible with other type of work. The Swedishgovernment, both in statements and through differenttypes of subsidies and compensations has also em-phasized the importance of the reindeer husbandry asa cornerstone in the Sami culture.

This paper has two purposes. The first purposeis to present a dynamic economic model of a pas-toralist such as a reindeer herder, who might haveother objectives besides profit maximization, leadingto testable hypotheses about the reindeer herder’ssupply of slaughtered reindeer. The second pur-pose is to test these hypotheses econometricallyon a data set from 1973–1974 to 1995–1996 onprices, quantities and other variables connected tothe Swedish reindeer herding industry with the am-bition to identify demand and supply functions. Inthe theoretical section a dynamic model for thereindeer herder’s supply of slaughtered reindeer ispresented, which is based on the fact that most rein-deer herders only receive part of their income fromreindeer husbandry. The intrinsic utility of being anactive reindeer herder here plays an important rolein determining supply. In the econometric sectionthe demand and supply functions that are relevantfor the reindeer herding industry are identified, us-ing three-stage least squares regression. The conse-quences of the meltdown of the nuclear reactor inChernobyl, the Ukraine, play an important part inthis market model. The reason is that after the ac-cident large numbers of slaughtered reindeer had tobe discarded because of excessive concentrations ofCesium 137 in the meat (caused by fallout carriedby the prevailing winds at the time). This implies,among other things, that the number of slaughteredanimals differs from the number that is actually cutup and sold on the market. The time period of thedata set covers the main aftermath of the Chernobylaccident, and the empirical analysis shows how de-mand and supply shifted following this environmentalcatastrophe. The final section gives some concludingremarks.

2. Modelling demand and supplyin the reindeer meat market

2.1. The supply side

The starting point for the theoretical supply model isthat most reindeer herders only get part of their incomefrom reindeer husbandry. According to the SwedishNational Board of Agriculture (Jordbruksverket, 1998)a reindeer herding family company requires more than400 reindeer for the family to be able to get their liveli-hood completely from their reindeer husbandry. Withabout 230,000 reindeer and about 930 reindeer herd-ing companies (Statistics Sweden, 1999) the averagenumber of reindeer per company is only 247. Further-more, according to an income survey in a report bythe Swedish Parliament Auditors (Riksdagens Revi-sorer, 1995–1996:8) the average household which in-cluded a reindeer herder received only 19% of theirincome from reindeer herding. This means that alter-native sources of income is important for most rein-deer herders and influences how much time that shouldbe devoted to the reindeer herding company. A largereindeer herd takes a lot of time to manage (roundingup the animals for branding or slaughter, moving themfrom winter to summer grazing grounds, etc.). How-ever, high prices on reindeer meat makes the trade-offbetween reindeer husbandry and other occupationalalternatives more to the advantage of the former.

The theoretical model presented here draws uponother models of agricultural households (e.g. Singhet al., 1986), but also includes the dynamics of rein-deer growth. The basis for the analysis is a utility max-imizing reindeer herder, who decides upon, privateconsumption (C), the size of his/her herd of reindeer(R) and the time devoted to work outside the rein-deer herding company (l2). Assume that the reindeerherder maximizes a utility function of the form,U =CT(1+R), whereC stands for private consumption,Tfor leisure time, andR is the herders’ private reindeerstock, representing the fact that the herd of reindeerprovides a intrinsic utility of its own for a Sami whois an active reindeer herder. Several government re-ports (e.g. Riksdagens Revisorer, 1995–1996:8; Ds,1998:8) have pointed out the low profitability amongthe reindeer herding companies. The fact that thecompanies persist despite this is evidence for theearlier mentioned cultural importance of the reindeer

G. Bostedt / Agricultural Economics 26 (2001) 217–226 219

husbandry that goes beyond being merely a source ofincome.

Essentially, the utility function states that the rein-deer herder values private consumption, leisure time,and being an active reindeer herder. The quasilinearfunctional form is one of the simplest conceivable util-ity functions that makesC andT essential goods whileallowingR to be a non-essential good, to permit the in-dividual Sami to enter and leave active reindeer herd-ing. Means for private consumption comes from twosources, profits from the reindeer herding company(p− ch)h− cRR and labor income from work outsidethe reindeer herding companyl2, which is paid withthe wage rate,w, i.e.

C = (p − ch)h − cRR + wl2 (1)

where p is the price (including price subsidies) perstandardized reindeer (assuming a constant share ofcalves),ch is the cost of slaughtering,h is the numberof slaughtered animals, andcR is the cost of managinga herd of a certain size (including the cost of supple-mentary fodder). Since most reindeer herding compa-nies are small, price-taking behavior is a reasonableassumption.

A private reindeer stock not only entails manage-ment costs, it also takes time. Leisure time is there-fore, defined as total time minus work managing thereindeer herd (including rounding up animals, brand-ing and slaughtering) and work outside the reindeerherding company, i.e.

T = L − l1R − l2 (2)

whereL is total time, andl1 is a coefficient denotingthe average extra time it takes to manage one morereindeer. Inserting Eqs. (1) and (2) in the utility func-tion, gives

U = [(p−ch)h−cRR+wl2][ L − l1R − l2][1 + R]

(3)

Reindeer growth is assumed to be a continuous func-tion of the stock minus the number of slaughtered an-imals, i.e.

R = f (R) − h (4)

where f (R) is the natural growth function for thereindeer stock. This function is assumed to have the

usual features of a compensatory growth function, i.e.f (R) = 0 whenR = 0 and at some carrying capacitystock, and∂f (R)/∂R = fR = 0 at some maximumsustainable yield stock (e.g. Clark, 1990). The size ofthe carrying capacity stock is assumed to depend onavailable grazing resources, such as lichen and sup-plementary fodder.

Maximizing the present value of an infinite streamof utilities with respect toh and l2 and wherer isthe discount rate, subject to the restriction given byEq. (4), gives the following current-valued Hamilto-nian

H = [(p − ch)h − cRR + wl2]

×(L − l1R − l2)(1 + R) + λ[f (R) − h] (5)

The first order condition with respect toh and thecostate equation gives a steady-state equilibrium(whereλ = 0) which is defined by

(r − fR)(p − ch)T (1 + R) + T (1 + R)cR

+ [l1(1 + R) − T ] (π + wl2) = 0 (6)

whereπ = (p−ch)h−cRR. We can now solve Eq. (6)for h as

h = [r − fRT (1 + R)]

T − l1(1 + R)

+ cRT (1 + R)

[T − l1(1 + R)] (p − ch)+ cRR − wl2

p − ch

(7)

From this it is evident that

∂h

∂p= 1

(p−ch)2

[(wl2−cRR) − cRT (1 + R)

[T − l1(1 + R)]

]

(8)

The sign of∂h/∂p will depend on(wl2 − cRR) −cRT (1 + R)/(T − l1(1 + R)). For a reindeer herderwith a very small herd∂h/∂p will be positive, since ifR → 0, ∂h/∂p → [(wl2 −cRT )/(T − l1)]/(p−ch)

2,which will be positive, sincecRT /(T − l1) ≈ cR (dueto the fact thatl1 will be small relative toT), andwl2 > cR (otherwise there would be no means forprivate consumption).

In the other extreme, for a reindeer herder witha herd so large that he is fully employed in rein-deer herding (i.e.l2 = 0) then, ∂h/∂p = [−1/

(p − ch)2] [cRR + cRT (1 + R)/(T − l1(1 + R))].

Here, the sign of∂h/∂p will depend on the sign of


T −l1(1+R)=(1/C) [(∂U/∂R) +(∂U/∂T ) (∂T /∂R)],which in turn depends on the relative importance ofthe marginal intrinsic utility ofR, which will be posi-tive, versus the marginal effect ofR on the marginalutility of leisure time, which will be negative. If∂U/∂R, i.e. the marginal intrinsic utility of increas-ing the reindeer herd, is sufficiently large the sign of∂h/∂p will be negative. Generally, we can expect tofind reindeer herders with both positive and negativesupply responses, depending the size of their reindeerherd, what other options are available in the labormarket (i.e.wi for an individuali), and their privatemarginal intrinsic utility of being an active reindeerherder.

It is interesting to examine other partial derivativesof the supply function as well. Consider the followingpartial derivative with respect to the private reindeerstock

∂h

∂R= T 2

[T − l1(1 + R)]2

[(r − fR) + cR

(p − ch)2

]

+ cR

p − ch

(9)

A sufficient (but not necessary) condition for thisexpression to be positive, meaning that herder witha larger herd will also have a larger slaughter, is thatr > fR, i.e. the rate of interest on the alternativeinvestment is greater than the growth rate of the rein-deer stock. The derivative with respect to the wagerate in the alternative occupation is:

∂h

∂w= − l2

p − ch

< 0 (10)

This sign depends on the fact that income from slaugh-tering and income from the alternative occupation areperfect substitutes.

2.2. The Chernobyl effect

On April 26, 1986, reactor 2 of the Chernobyl nu-clear facility in the Ukraine had a meltdown. Due ofthe prevailing wind during the days after the accidentsections of northern Sweden were relatively heavy af-fected by the fallout of Cesium 137, although, thecontamination levels were nowhere near the levels in-curred in the Ukraine. This meant that reindeer meatsuffered from a relatively high level of contamination.As a direct consequence of the Chernobyl accident the

slaughtered reindeer had to be tested for Cesium 137concentration. Reindeer in which the meat is above acertain Bequerel level are discarded and not broughtto the market. The reindeer herder can influence theshare that is discarded to a certain extent by slaugh-tering earlier, giving non-contaminated fodder to thereindeer, etc. If the reindeer herders have taken suchmitigative measures to try to reduce the contamina-tion level in the meat, they receive compensation forreindeers that despite this are discarded.

More than 78% of the harvest was discarded dur-ing the year after the Chernobyl accident. Mitigativeefforts and the relatively fast decay of the radioac-tive isotope Cesium 137 has since reduced the shareof discarded reindeer to the extent that the Chernobyleffect today (2000) mostly is a bad memory. What ef-fects did the Chernobyl accident have on the harvestbehavior of the reindeer herder?

The Swedish National Board of Agriculture and theCounty Administrative Board pays several differentcompensations associated with the Chernobyl acci-dent. The County Administrative Board compensatesfor mitigative measures while the Swedish NationalBoard of Agriculture compensates for lost meat rev-enue. Since the latter compensation is based on therelevant market price plus the price subsidy the onlysupply effect that can be expected from the Chernobylaccident is perhaps a small reduction in supply dueto the unpleasantness of having to bury slaughteredreindeer.

On the demand side it can be noted that whilereindeer meat suffered from a relatively high level ofcontamination, other types of meat was less affected.Not surprisingly, the information about radioactivelycontaminated reindeer led to a preference shift amongconsumers away from reindeer meat towards othertypes of meat, causing a price drop. As the theoreticalmodel allows, a lower price can induce some reindeerherders with large herds to make an increase in theharvest.

2.3. The demand side and the market model

In general, reindeer meat is not an important fooditem in Sweden. The average quantity sold each yearcorresponds to about 0.6% of the total Swedish meatmarket. It is, however, locally more important in north-ern Sweden, and about eight percent is consumed by


the reindeer herders themselves (Statistics Sweden,1999). Although, no detailed statistics are available,it is possible to roughly divide the demand for rein-deer meat into two groups, according to a 1983 reportfrom a Swedish government commission on reindeerhusbandry (SOU, 1983:67). The first group is the lo-cal consumers in the inner parts of northern Sweden.This group has an acquired taste for reindeer meatand have a relatively low price elasticity compared tothe second group. This second group consists of thewholesalers and restaurants that provide customers inthe larger cities in Sweden with reindeer meat. Theexport of reindeer meat, which is has increased fromabout 5–10% of the slaughter in the early 1980s (SOU,1983:67) to about 20–30% in the mid-1990s (StatisticsSweden, 1999), can also be assigned to this group. Thegroup is characterized by higher price elasticity andis prone to preference shifts, as for instance inducedby the Chernobyl accident. The higher price elasticitygives this group a disproportionate influence on thetotal demand.

The relevant quantity variable for the demand side isnot the number of slaughtered reindeer, but the quan-tity of reindeer meat on the market. For the studiedperiod this quantity is highly influenced by the shareof discarded reindeer due to the Chernobyl effect.

We are now ready to suggest some hypothesis aboutdemand. LetpR,t be the deflated price to produc-ers in Swedish crowns (SEK), andpR,d (khN, pB, α)

be the inverse demand function, wherek is a con-stant that we will use to switch from calculating innumber of slaughtered reindeer to quantity of meat.This constant then represents the meat content in theaverage slaughtered reindeer. The variableshN andpB is the net slaughter, i.e. the number of slaugh-tered non-discarded reindeer, and the price of a substi-tute good (e.g. beef meat), respectively. The hypoth-esis is that∂pR,d(·)/∂hN < 0 and∂pR,d(·)/∂pB >

0. The share of discarded slaughtered reindeer,α, isused as an indicator of the perceived severity of theChernobyl problem, with∂pR,d(·)/∂α < 0. Similarly,hG,s(R, p, s, w) is the short-run gross supply func-tion. The partial derivative∂hG,s(·)/∂R can take botha positive or a negative sign, largely depending on thegrowth rate of the reindeer herd, as shown in Eq. (9).The variablep here indicates the price excluding sub-sidies, where the hypothesis is that∂hG,s(·)/∂pR < 0for reindeer herders with large herds (and vice versa),

as shown by Eq. (8). The variables is the price sub-sidy, where the hypothesis is the same as forp. Fol-lowing Eq. (10) the hypothesis for the wage rate,w,is ∂hG,s(·)/∂w < 0. Given the simultaneity of themodel, ordinary least squares (OLS) estimation willyield biased estimates, and simultaneous-equation es-timation techniques will be required.

3. Empirical analysis

3.1. The data

The data set that has been used in the econometricanalysis below ranges from 1973–1974 to 1995–1996and consists of the following variables

hG,t total number of slaughtered reindeerhN ,t number of slaughtered, non-discarded reindeerpB,t price of beef meat deflated by consumer price

index (base year= 1980), SEKpR,t price of reindeer meat deflated by consumer

price index (base year= 1980), SEKQt quantity of reindeer meat sold (metric tonnes)Rt total reindeer herd (winter herd)st government subsidy per slaughtered,

non-discarded reindeer, deflated by consumerprice index (base year= 1980), SEK

wt average male hourly earnings in agriculture,forestry, hunting and fishing deflated byconsumer price index (base year= 1980), SEK

�t share of discarded reindeer:αt = 1 − (

hN,t /hG,t

)An ordinary least squares regression of the quan-

tity of reindeer meat sold (Qt ) against the number ofslaughtered, non-discarded reindeer (hN ,t ) gives a co-

efficient of 0.031582 (t-statistic: 223.152,R2: 0.996,

degrees of freedom: 22). No constant was used in thisregression since, logically, ifhN,t = 0, thenQt = 0,as well. A regression with a constant resulted in aninsignificant constant very close to zero, and a slopecoefficient almost identical to the above. The slope co-efficient in the above regression can be interpreted asthe meat content (metric tonnes) in a typical slaugh-tered reindeer, i.e. 31.582 kg/slaughtered reindeer. Theregression statistics illustrate the stability of this av-erage carcass weight, and the residuals can to a largeextent be explained by changes in the proportion of


Fig. 1. Total number of slaughtered reindeer and the number of slaughtered non-discarded reindeer.

calves being slaughtered. In the following the number0.031582 will be used to switch from counting in num-bers of reindeer to quantity of meat (metric tonnes).

A few graphs should give a sense of the magnitudeand changes in certain variables. The upper time seriesin Fig. 1 is the total number of slaughtered reindeer,hG,t , whereas, the lower time series refers to the num-ber of slaughtered, non-discarded reindeer,hN ,t . Notethat hN,t = hG,t before 1987, i.e. before the Cher-nobyl meltdown. As mentioned, after the Chernobylaccident more than 78% of the slaughtered reindeerwere discarded due to the Cesium 137 content. Theshare of discarded reindeer has then declined, partlydue to actions taken by the Sami to mitigate the ef-fects, such as giving the reindeer non-contaminatedfodder. No graph forQt is shown since it would bevirtually identical to the graph forhN ,t in shape.

The real price,pR,t , decreased almost constantlyfrom 1974 to 1993 and then climbed again slowly.Despite this, the gross supply in terms of total num-ber of slaughtered reindeer each year increased almostconstantly during the same period. However, as men-tioned earlier, the reindeer herder does not only re-ceive pR,t . He/she also receives a price subsidy perslaughtered, non-discarded reindeer, here denotedst .This subsidy is similar to the subsidies awarded toother agricultural products in Sweden. However, thesubsidy can also be seen as one way for the Swedishgovernment to put money behind the statements aboutthe cultural importance of the reindeer husbandry. Itis worth noting that sincest is paid per slaughtered,non-discarded reindeer regardless of weight it gives

incentives to slaughter calves. However, despite thisthe average carcass weight has not decreased over theyears, as evident from the previous regression ofQt

againsthN ,t . We can now calculate the deflated totalrevenue per slaughtered, non-discarded reindeer, em-pirically defined asIt = 31.582pR,t + st . Fig. 2 illus-trates the development ofIt andst .

From Fig. 2 it is evident that the subsidy has morethan doubled in real terms during the studied period.This fact combined with the drop inpR,t impliesthat the subsidy part of the revenue earned for ev-ery non-discarded reindeer has increased from aboutnine percent in the beginning of the studied periodto about 28% in the end of it. This has, however, notbeen sufficient to prevent an almost constant drop inIt from 1974 to 1993.

3.2. Empirical results

As mentioned earlier, the demand/supply sys-tem characterised bypR,d (khN, pB, α) and hG,s(R, p, s, w) is assumed to be simultaneous. Thisassumption was tested using a variant of the Haus-man specification test described in Spencer and Berk(1981). This test consists of first regressing the ex-planatory variable that is suspected to be simultaneouswith the dependent variable against all exogenousvariables (the reduced form equation), and then usingthe residuals as an independent variable when esti-mating the demand and supply equations separately.A t-test of the coefficient of the residuals with the nullhypothesis of no simultaneity completes the test (cf.


Fig. 2. Deflated total revenue to the reindeer herder per slaughtered, non-discarded reindeer and the deflated subsidy.

Pindyck and Rubinfeld, 1991). In the demand equa-tion Qt was used, since as noted aboveQt ≈ khN,t

when k = 0.031582. The test of the simultaneity ofpR,t and Qt in the demand equation show that thenull hypothesis of no simultaneity can not be rejected(t-statistic of the coefficient of the residuals was equalto −0.560, with 17 degrees of freedom). The corre-sponding test of the simultaneity ofhG,t andpR,t inthe supply equation show, however, that the null hy-pothesis of no simultaneity can be rejected at the onepercent level (t-statistic of the coefficient of the resid-uals was equal to 2.638, with 15 degrees of freedom).

These tests show that simultaneous-equation esti-mation techniques are required. To this end three-stageleast squares (3SLS) was applied (Greene, 1995).The 3SLS estimator was preferred before two-stageleast squares (2SLS) since the former uses all of theavailable information and has a smaller asymptoticvariance–covariance matrix than single-equation esti-mators, such as 2SLS. Also, under the usual assump-tion, that the disturbances are distributed multivariatenormally, it is at least as efficient as any other estima-tor that uses the same amount of information. If thedisturbances in the demand and supply equations areuncorrelated, 3SLS reduces to 2SLS (cf. Kennedy,1998). Preliminary tests show a gain in efficiencyfrom using 3SLS, compared with 2SLS. Two func-tional forms, a linear and a logarithmic, were tested.Following the inverse demand function in Section 2.3,

αt is used as an indicator of the perceived severity ofthe Chernobyl problem, i.e. as a demand shifter. Fur-thermore, since ifαt = 0 (which was the case beforethe Chernobyl accident), ln(αt ) = −∞, the share ofnon-discarded reindeer, ln(1 − αt ), was used in thelogarithmic case. Naturally, the expected sign of thecoefficient then becomes reversed. To investigate anysupply effect from the Chernobyl accident due to theunpleasantness of having to bury slaughtered reindeer,αt−1 and ln(1 − αt−1) was added in the linear andlogarithmic specifications, respectively. The resultsare presented in Table 1.

Most coefficients are significant and have the ex-pected signs. A noteworthy feature in the linear modelpresented in columns 2 and 3 is the significant nega-tive demand effect ofαt . Using the coefficient onQt

and the coefficient onαt as estimates on∂pR,t /∂Qt

and∂pR,t /∂αt , respectively, the estimate of∂Qt/∂αt

becomes−3884.92. Sinceαt is a share the interpreta-tion is that if the share of discarded reindeer increasesby ten percentage points the quantity of reindeer meatdemanded is reduced by about 388 metric tonnes dueto the preference shift. This shows the strong neg-ative demand effect caused by the publicity aroundthe Chernobyl problem for the reindeer husbandry,and the subsequent preference shift. A feature in bothmodels is the absence of a significant supply effectof αt−1 or, in the logarithmic model, ln(1 − αt−1).Note also the negative coefficients onpR,t and st ,


Table 1Three-stage least squares estimates of demand and supply functions for the Swedish reindeer meat market during 1973–1974 to 1995–1996a

Explanatoryvariables

Inverse demand functiondependent variable (pR,t )

Supply functiondependent variable (hG,t )

Inverse demand functiondependent variable ln (pR,t )

Supply function dependentvariable ln (hG,t )

Constant 9.0287 (3.123)∗∗ 40516 (0.602) 3.3781 (3.020)∗∗ −6.8634 (−1.174)Qt −0.17562E−02 (−2.753)∗∗ln (Qt ) −0.29046 (−2.844)∗∗pB,t 0.56069 (4.248)∗∗∗ln (pB,t ) 0.51869 (3.188)∗∗αt −6.8227 (−5.000)∗∗∗ln (1 − αt ) 0.35646 (4.080)∗∗∗Rt 0.32254 (3.497)∗∗ln (Rt ) 1.6641 (5.203)∗∗∗pR,t −4475.9 (−3.199)∗∗ln (pR,t ) −0.76801 (−3.312)∗∗∗st −285.46 (−4.397)∗∗∗ln (st ) −0.36876 (−4.698)∗∗∗wt 1049.3 (1.091)ln (wt ) 0.24589 (0.500)αt −1 12922 (1.924)ln (1 − αt−1) −0.08215 (−1.815)

R2

0.856 0.916 0.754 0.926Degrees of freedom 18 16 18 16

a T-values are within parentheses.∗∗ Significant at 1% level.∗∗∗ Significant at 0.1% level.

imply a “backward-sloping” supply curve. As in-dicated by the theoretical section, negative supplyresponses is a possibility for reindeer herders withlarge herds. This supply curve evokes questions aboutthe stability of an equilibrium price. If∂hs/∂pR <

∂hd/∂pR at the equilibrium price the market ad-justment will tend to diverge from the equilibrium,making it unstable. The coefficient onpR,t gives anestimate on∂hs/∂pR, and inverting the coefficienton Qt gives an estimate on∂Qd/∂pR. Multiplyingthe latter figure with the average number of reindeerrequired to produce one metric tonne (31.664, whichis the inverse of the coefficient for average carcassweight), gives an estimate of−18,029.8 for∂hd/∂pR.Since, this is less than the estimate on∂hs/∂pR themarket equilibrium appears to be stable.

A non-expected sign is found in the coefficients onwt and ln(wt ), which contradict the theoretical pre-diction in Eq. (10). These coefficients are, however,not significant, which is most likely due to the lack ofmore specific empirical data onwt . The coefficients inthe logarithmic model presented in the two rightmostcolumns have the advantage of being able to interpret

as elasticities. Note here, the strong supply elasticityfrom increases in the reindeer herd, indicating thestock-harvest relation. The apparent difference in thecoefficients on ln(pR,t ) and ln(st ) may appear some-what puzzling. There is no obvious reason why a onepercent change in the real price should have a largereffect than a one percent change in the real price sub-sidy. To investigate this anomaly closer at-test withthe null hypothesis that the coefficients of ln(pR,t )

and ln(st ) are equal was conducted. To do the testthe supply equation given by the rightmost columnin Table 1 was reestimated replacing ln(pR,t ) withln(pR,t ) + ln(st ) (and keeping ln(st ) as a separatevariable, see Pindyck and Rubinfeld, 1991, p. 114,for details). Since in this estimation the coefficienton ln(st ) is insignificant (t-statistic: 1.58) we havefailed to reject the null hypothesis of no difference inthe supply effect between ln(pR,t ) and ln(st ), i.e. theapparent difference in the coefficients in Table 1 isinsignificant.

The demand and supply equations in Table 1 can beused to calculate the reduced form parameters, solvingfor either price or quantity. To illustrate the fit of the


Fig. 3. Actual and predicted total slaughter of reindeer (top) and deflated price of reindeer meat (bottom).

model, the reduced form equations forhG,t andpR,t inthe linear model were used to obtain fitted valueshG,t

and pG,t . The actual and fitted values are illustratedin Fig. 3.

The model satisfactorily describes the fluctuationsin quantities and prices, with a mean absolute devia-tion of 8.3 and 9.3% forhG,t and pG,t , respectively.The model correctly picks up the sharp increase inslaughter in 1990–1991. However, it overestimates theprice in the beginning of the 1990s.

4. Concluding remarks

Reindeer husbandry in Sweden has during the latestdecades been under significant pressure from fallingprices, partly caused by the effects of the Chernobylmeltdown. This paper has attempted to analyze thereindeer meat market based on a dynamic, theoreticalmodel of the reindeer herder’s decision problem. As

the theoretical model shows, the intrinsic utility of theSami way of life, i.e. being an active reindeer herder,plays an important role for the supply response. Suchintrinsic utility arguments are likely to be commonalso for other types of pastoralists. Acknowledging theexistence of such arguments is a crucial element inunderstanding pastoralist cultures and decisions.

The subsequent econometric analysis used three-stage least squares to analyze a data set coveringthe period from 1973–1974 to 1995–1996, a periodwhich covers the main aftermath of the Chernobylaccident. The analysis reveals that the supply func-tion for slaughtered reindeer is “backward-sloping”,which is in accordance with the theoretical modeloutlined earlier. The backward slope is, however, notso large as to make the market equilibrium unstable.When using the share of discarded reindeer (due toCesium 137 content) as a proxy for the intensity ofthe Chernobyl problem the econometric results showa strong negative demand effect.


The presented results have few predecessors. In areport to the Swedish Ministry of Finance (Ds, 1998:8)the authors present an OLS estimation of the supplyfunction with ln(hG,t ) as a function of ln(st ), ln(Rt ),and ln(pR,t ). However, the report does not mentionthe econometric problem of identifying demand andsupply functions in simultaneous equation systems,and the fact that OLS will yield biased estimates whenused to estimate the supply function in such a setting.Despite this, it is interesting to note that, the estimatesin the report are fairly close to the ones presentedabove.

It is clearly possible to model the reindeer herder’sdecision problem in the theoretical section in a moredetailed manner. One such avenue would be to makethe time cost of managing the reindeer herd depen-dent on the amount of fixed costs (i.e. using more ma-chines, like motorcycles, makes it possible to managea larger herd in the same amount of time). These typesof theoretical refinements would, however, be moreinteresting should there exist data on the firm level ontime usage and fixed costs. Data on factors that influ-ence the grazing conditions would also improve theempirical estimates. Finding and utilizing data on theeffects of forestry on the grazing conditions will bethe subject for future research.

Acknowledgements

This paper is based on research that was madepossible by financial support from the research pro-gramme on natural resources in the Swedish moun-tain region sponsored by the Swedish Foundation forStrategic Environmental Research (MISTRA). The

author would like to thank without implicating MattiasBoman, Leif Mattsson, Peichen Gong, and Öje Danell,all at the Swedish University of Agricultural Sciences,SLU, for comments on earlier versions of the paper.Finally, I thank Heather Reese, SLU in Umeå, forcorrecting my English, and an anonymous reviewerfor comments on an earlier version of the paper.

References

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reindeer husbandry, the swedish market for reindeer meat, and the chernobyl effects

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