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Deforestation, Land Taxes and Development

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  • Kalkuhl, Matthias
  • Edenhofer, Ottmar

Abstract

This paper combines neoclassical growth theory with the von Th nen approach of land conversion to model deforestation and land allocation decisions in an intertemporal general equilibrium context suitable for developing countries. Analyzing the impact of several forest conservation policies, including international transfers under a REDD+ scheme, emphasized the role of taxes on non-forest land as effective and powerful policy that has been largely neglected so far.The findings of our equilibrium analysis are in stark contrast to the conventional economic wisdom that taxes on land are allocation neutral. As we model deforestation as one investment decision besides investment into physical capital stocks, land taxes may not only increase forest conservation levels but also overall capital stocks and output. We identify the conditions that lead to this double-dividend effect and apply them to data for a set of countries, concluding that forest conservation, e.g. implemented by land taxes, can have this positive effect for many developing countries. Additionally, we reassess Borlaug s hypothesis and Jevons paradox in a general-equilibrium context and design a land tax scheme that is robust to agricultural yield increases.

Suggested Citation

  • Kalkuhl, Matthias & Edenhofer, Ottmar, 2015. "Deforestation, Land Taxes and Development," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112961, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:112961
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    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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