Can economic development and forest conservation coexist? Revisiting growth and deforestation in the Brazilian Amazon

This study investigates the complex link between municipal income and deforestation in the Brazilian Amazon during a period of significant reduction in forest loss. Recognizing the potential limitations of microeconometric approaches that may overlook general equilibrium effects, we employ a spatially and dynamically robust econometric framework. This framework incorporates a comprehensive set of control variables identified as key deforestation drivers, allowing us to capture broader economic interactions. Our results point to a statistically significant negative relationship between GDP per capita and deforestation, with this effect being more pronounced in agricultural frontier municipalities and at the middle and higher income levels. We attribute this relationship to factors such as urbanization towards less land-intensive activities, poverty reduction, increased agricultural productivity, and improved access to national markets. Beyond traditional deforestation measures, we investigate a broader environmental health indicator that accounts for biodiversity loss and ecosystem service degradation, providing a more comprehensive assessment of the environmental consequences of economic development and its implications for sustainable resource management.