Journal of Forestry Research DOI 10.1007/s11676-013-0371-8 Efficiency of Iranian forest industry based on DEA models Soleiman Mohammadi Limaei Received: 2012-01-11; Accepted: 2012-05-22 © Northeast Forestry University and Springer-Verlag Berlin Heidelberg 2013 Abstract: Data Envelopment Analysis (DEA) is a mathematical tech- nique to assess relative efficiencies of decision making units (DMUs). The efficiency of 14 Iranian forest companies and forest management units was investigated in 2010. Efficiency of the companies was esti- mated by using a traditional DEA model and a two-stage DEA model. Traditional DEA models consider all DMU activities as a black box and ignore the intermediate products, while two-stage models address inter- mediate processes. LINGO software was used for analysis. Overall pro- duction was divided into to processes for analyses by the two-stage model, timber harvest and marketing. Wilcoxon’s signed-rank test was used to identify the differences of average efficiency in the harvesting and marketing sub-process. Weak performance in the harvesting sub-process was the cause of low efficiency in 2010. Companies such as Neka Chob and Kelardasht proved efficient at timber harvest, and Neka Chob forest company scored highest in overall efficiency. Finally, the reference units identified according to the results of two-stage DEA analysis. Keywords: traditional DEA model; two-stage DEA model; Iranian forest industries; harvesting sub-process; marketing sub-process Introduction The area of natural forest in Iran is approximately 12.4 million ha of which about 1.9 million ha is managed as commercial for- est called Iranian Caspian forest in northern Iran (Mohammadi Limaei et al. 2011). The forests of Iran represent 7.5% of the total area of the country. Iranian Caspian forests are located on the south coast of the Caspian Sea and the northern slopes of the Alborz Mountain range from sea level to 2,800 m. These forests grow in a strip 800 km in length and 20-70 km wide. These are The online version is available at http://www.springerlink.com Soleiman Mohammadi Limaei ( ) Department of Forestry, Faculty of Natural Resources, University of Guilan, P.O. Box 1144, Someh Sara, Iran. E-mail: limaei@guilan.ac.ir Corresponding editor: Yu Lei the most valuable forests in Iran. Industrial harvesting occurs only in the Caspian forest. Because of the severe climatic condi- tions and forest degradation, forests in other regions are not ex- ploited for industrial wood production. Forest industries in Iran produce sawnwood and wood-based panels as well as pulp and paper from hardwood species. Moderate volumes of forest prod- ucts, mainly paper, are imported. Modest quantities of wood are burned as fuel. (Mohammadi Limaei 2010). Utilization of Iranian forests is subject to three kinds of man- agement: State-owned firms: using government investment within the framework of the constitution of state-owned firms. Private firms: using private sector investment and manage- ment and aiming at applying capital investment to forestry. Cooperative firms: for utilization but also for forest protec- tion and restoration, and afforestation of degraded forests (Mohammadi Limaei 2011). There are 50 forest companies in north. Eighteen companies are cooperative firms, 12 are state-owned, and 20 are private. Measuring the performance of a production system is an im- portant task in control and planning. Data envelopment analysis (DEA), developed by Charnes et al. (1978), is a nonparametric method in operations research and economics for the estimation of production frontiers. It is used to empirically measure the efficiency of decision making units (DMUs). DEA is widely applied to measure the relative efficiency of a set of production systems or DMUs that apply the same inputs to produce the same outputs. This method identifies DMUs with weak performance and shows the causes of inefficiency (Cardillo 2000). DEA has been applied for efficiency measurement of forest industries in many countries. DEA analyses have addressed for- est management (Kao and Yang 1991 and 1992; Joro and Viitala 1999; Bogatoft et al. 2003), logging (Lebel and Stuart 1998; Hailu and Veeman 2003), pulp and paper (Yin 2000; Hailu and Veeman 2001), and sawmilling (Fotiou 2000; Nyrud and Baard- sen 2003; Salehirad and Sowlati 2005). All performance analyses in the forest management area used the non-parametric approach, because it can incorporate inputs and outputs without reference to market values. These studies mainly addressed the efficiency of public forest districts and the impacts on performance of var- ious management scenarios. DEA was used for efficiency analy- ORIGINAL PAPER