2002 World Congress of Environmental and Resource Economists

This paper investigates whether available evidence supports the common hypothesis that households living near tropical forests clear additional forest for agriculture over time because they cannot finance desired investments to maintain or increase yields. I develop a model of land use and show that theoretically the effect of increases in income on land clearing is ambiguous. Using panel data, I investigate this hypothesis in Peru. I show that increases in income are correlated with land clearing, though at a decreasing rate, and that, because of labor market constraints, this relationship depends on household size. Increases in permanent income are particularly correlated with land clearing. In contrast, marginal increases in income are not associated with increased fertilizer expenditure. These results suggest that policies to reduce both poverty and deforestation may exist, but small increases in incomes at the forest margin are unlikely to reduce deforestation. Improving labor markets may be a more effective policy tool to raise incomes and reduce pressure on forests.



	Paper Title:	Does Poverty Constrain Deforestation? Econometric Evidence From Peru
	Presenting Author:	Alix Peterson Zwane (Harvard University)
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	Abstract:	This paper investigates whether available evidence supports the common hypothesis that households living near tropical forests clear additional forest for agriculture over time because they cannot finance desired investments to maintain or increase yields. I develop a model of land use and show that theoretically the effect of increases in income on land clearing is ambiguous. Using panel data, I investigate this hypothesis in Peru. I show that increases in income are correlated with land clearing, though at a decreasing rate, and that, because of labor market constraints, this relationship depends on household size. Increases in permanent income are particularly correlated with land clearing. In contrast, marginal increases in income are not associated with increased fertilizer expenditure. These results suggest that policies to reduce both poverty and deforestation may exist, but small increases in incomes at the forest margin are unlikely to reduce deforestation. Improving labor markets may be a more effective policy tool to raise incomes and reduce pressure on forests.
	Link to paper:	Not available

	Session / Day / Time	1B / Monday / 8:00 - 10:00 am

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