The impact of subsidies on the operating profit in the Swiss forestry sector

Abstract

The purpose of subsidies for forestry companies is to ensure the provision of forest ecosystem services. As a negative side effect, previous studies, however, have suggested that these subsidies lower the efficiency of the companies and thus decrease their operating profit. The goal of this thesis is to investigate the impact of subsidies on the operating profit of Swiss forestry companies. Based on a regression model, the correlation between the operating profit (dependent variable) and independent variables including subsidies was quantified. The regression model showed that subsidies have a significant, positive impact on the operating profit, but six other factors have a higher impact than subsidies. Two assumptions can explain these results, which stand in contrast to those found in previous studies: firstly, the policy cycle has been repeated several times to enable this positive side effect and secondly, that subsidies are primarily paid for outputs of the value chain of forestry companies. These suggested explanations, however, should be tested further.