September 25, 2011

The Political Economy of Deforestation in the Tropics

 by Robin Burgess, Matthew Hansen, Benjamin A. Olken, Peter Potapov, Stefanie Sieber

- 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 understanding 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.

Burgess, R., M. Hansen, B.A. Olken, P. Potapov, S. Sieber (2011). "The Political Economy of Deforestation in the Tropics." NBER Working Paper No. 17417, Sept 2011.