The Political Economy of Deforestation in the Tropics

48 Pages Posted: 28 Sep 2012

See all articles by Robin Burgess

Robin Burgess

London School of Economics (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Matthew Hansen

University of Maryland

Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); Harvard University - Society of Fellows

Peter Potapov

affiliation not provided to SSRN

Stefanie Sieber

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: June 2012

Abstract

Tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world's most diverse ecosystems. The prevalence of illegal forest extraction in the tropics suggests that understanding the incentives of local bureaucrats and politicians who enforce forest policy may be critical to combating tropical deforestation. We find support for this thesis using a novel satellite-based dataset that tracks annual changes in forest cover across eight years of institutional change in post-Soeharto Indonesia. Increases in the numbers of political jurisdictions are associated with increased deforestation and with lower prices in local wood markets, consistent with a model of Cournot competition between jurisdictions. We also show that illegal logging and rents from unevenly distributed oil and gas revenues are short run substitutes, but this effect disappears over time as political turnover occurs. The results illustrate how incentives faced by local government o¢ cials affect deforestation, and provide an example of how standard economic theories can explain illegal behavior.

Keywords: biodiversity, climate change, corruption, Cournot competition, deforestation, environmental monitoring, illegal logging, political economy, satellite imagery

JEL Classification: D73, L73

Suggested Citation

Burgess, Robin and Hansen, Matthew and Olken, Benjamin A. and Potapov, Peter and Sieber, Stefanie, The Political Economy of Deforestation in the Tropics (June 2012). CEPR Discussion Paper No. DP9020, Available at SSRN: https://ssrn.com/abstract=2153452

Robin Burgess (Contact Author)

London School of Economics (LSE) - Department of Economics ( email )

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HOME PAGE: http://econ.lse.ac.uk/staff/rburgess/index_own.html

Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Matthew Hansen

University of Maryland ( email )

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Benjamin A. Olken

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Harvard University - Society of Fellows

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Peter Potapov

affiliation not provided to SSRN ( email )

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Stefanie Sieber

affiliation not provided to SSRN ( email )

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