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The Political Economy of Deforestation in the Tropics

Author

Listed:
  • Olken, Benjamin
  • Sieber, Stefanie
  • Hansen, Matthew
  • Potapov, Peter

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.

Suggested Citation

  • Olken, Benjamin & Sieber, Stefanie & Hansen, Matthew & Potapov, Peter, 2012. "The Political Economy of Deforestation in the Tropics," CEPR Discussion Papers 9020, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:9020
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    References listed on IDEAS

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    1. Akhmed Akhmedov & Ekaterina Zhuravskaya, 2004. "Opportunistic Political Cycles: Test in a Young Democracy Setting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(4), pages 1301-1338.
    2. Baland, Jean-Marie & Bardhan, Pranab & Das, Sanghamitra & Mookherjee, Dilip, 2010. "Forests to the People: Decentralization and Forest Degradation in the Indian Himalayas," World Development, Elsevier, vol. 38(11), pages 1642-1656, November.
    3. Alberto Alesina, 1987. "Macroeconomic Policy in a Two-Party System as a Repeated Game," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 651-678.
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    More about this item

    Keywords

    Political economy; Corruption; Deforestation; Cournot competition; Satellite imagery; Environmental monitoring; Illegal logging; Climate change; Biodiversity;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • L73 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Forest Products

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