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Do property rights promote investment but cause deforestation? Quasi-experimental evidence from Nicaragua

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  • Liscow, Zachary D.

Abstract

Many policymakers argue that property rights decrease deforestation. Some theoretical papers also make this prediction, arguing that property rights decrease discount rates applied to a long-term investment in forestry. However, the effect is theoretically ambiguous. The paper takes a novel instrumental variables approach based on Nicaragua's agrarian reform to test for the effect, using a new dataset—Nicaragua's 2001 agricultural census. It finds that property rights significantly increase deforestation. The model, supported by the data, suggests a likely mechanism for this relationship: property rights increase investment, increasing agricultural productivity and therefore the returns to deforestation.

Suggested Citation

  • Liscow, Zachary D., 2013. "Do property rights promote investment but cause deforestation? Quasi-experimental evidence from Nicaragua," Journal of Environmental Economics and Management, Elsevier, vol. 65(2), pages 241-261.
    • Handle: RePEc:eee:jeeman:v:65:y:2013:i:2:p:241-261
    DOI: 10.1016/j.jeem.2012.07.001
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    References listed on IDEAS

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