Is deforestation needed for growth? Testing the EKC hypothesis for Latin America

The current climate change debate puts forest conservation and halting deforestation at the forefront of the social and political agenda. This paper analyzes the relationship between forested area and economic growth for a sample of 19 Latin American countries. The selected region has extensive forested areas, but also high rates of deforestation, which makes it a crucial area for reversing deforestation trends. The Environmental Kuznets Curve hypothesis for deforestation is tested for the period 1991–2014, taking environmental damage to the forest cover as an indicator, measured through two variables: the forested area per capita and a comparison to the country's total area. The methodology used applied regressions by panel data, using a semiparametric technique, as well as the generalized method of moments quantile-regression. Obtained results support the hypothesis, although the positive effects of economic growth on forestation tends to disappear, as the income levels become higher. More specifically, the quantile regression shows a positive, growing relationship between forested area per capita and economic growth (from a threshold point) that tends to be softer in more forested areas. Meanwhile, the U-shaped relationship supported when the forested area is compared to the total area tends to reach the maximum value. Therefore, the positive effects of economic growth on forestation tend to disappear, this being more especially observed in the most forested areas.