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Deforestation, Production Intensity and Land Use under Insecure Property Rights

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  • Gregory S. Amacher
  • Erkki Koskela
  • Markku Ollikainen
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    Abstract

    We propose a framework with endogenous allocation of land between agricultural production, sustainable forest management, and unsustainable forest exploitation in the form of illegal logging to explore deforestation and agricultural and timber supplies when property rights are insecure. Uncertainty over property rights arises through risk of confiscation on sustainably-managed forest land, and through illegal logging activities on frontier native forest land. Confiscation risk is shown to increase deforestation by increasing both land conversion to agriculture and illegal logging. Contrary to current wisdom, we find that higher timber prices do not necessarily lead to an increase in the land used for sustainable forestry, because higher prices stimulate illegal logging activity. Increased monitoring and stronger enforcement reduce illegal logging, and thus deforestation. Confiscation risk decreases timber supply from unsustainable forestry practices while the affect of timber price on timber supply is ambiguous.

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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1128.

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    Date of creation: 2004
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    Handle: RePEc:ces:ceswps:_1128

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    Keywords: deforestation; property rights; stochastic rotation;

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    1. Andersen,Lykke E. & Granger,Clive W. J. & Reis,Eustaquio J. & Weinhold,Diana & Wunder,Sven, 2002. "The Dynamics of Deforestation and Economic Growth in the Brazilian Amazon," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521811972.
    2. Robert T. Deacon, 1994. "Deforestation and the Rule of Law in a Cross-Section of Countries," Land Economics, University of Wisconsin Press, vol. 70(4), pages 414-430.
    3. Lichtenberg, Erik, 2000. "Agriculture And The Environment," Working Papers, University of Maryland, Department of Agricultural and Resource Economics 28567, University of Maryland, Department of Agricultural and Resource Economics.
    4. Reed, William J., 1984. "The effects of the risk of fire on the optimal rotation of a forest," Journal of Environmental Economics and Management, Elsevier, vol. 11(2), pages 180-190, June.
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    6. Reed, William J., 1993. "The decision to conserve or harvest old-growth forest," Ecological Economics, Elsevier, Elsevier, vol. 8(1), pages 45-69, August.
    7. Ian W. Hardie & Peter J. Parks, 1997. "Land Use with Heterogeneous Land Quality: An Application of an Area Base Model," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, Agricultural and Applied Economics Association, vol. 79(2), pages 299-310.
    8. Peter Park & Edward Barbier & Joanne Burgess, 1998. "The Economics of Forest Land Use in Temperate and Tropical Areas," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 11(3), pages 473-487, April.
    9. Linwood H. Pendleton & E. Lance Howe, 2002. "Market Integration, Development, and Smallholder Forest Clearance," Land Economics, University of Wisconsin Press, vol. 78(1), pages 1-19.
    10. Angelsen, Arild & Kaimowitz, David, 1999. "Rethinking the Causes of Deforestation: Lessons from Economic Models," World Bank Research Observer, World Bank Group, World Bank Group, vol. 14(1), pages 73-98, February.
    11. Khanna, Madhu & Isik, Murat & Zilberman, David, 2002. "Cost-effectiveness of alternative green payment policies for conservation technology adoption with heterogeneous land quality," Agricultural Economics, Blackwell, Blackwell, vol. 27(2), pages 157-174, August.
    12. Hartwick, John M. & Van Long, Ngo & Tian, Huilan, 2001. "Deforestation and Development in a Small Open Economy," Journal of Environmental Economics and Management, Elsevier, vol. 41(3), pages 235-251, May.
    13. Clarke, Harry R. & Reed, William J. & Shrestha, Ram M., 1993. "Optimal enforcement of property rights on developing country forests subject to illegal logging," Resource and Energy Economics, Elsevier, Elsevier, vol. 15(3), pages 271-293, September.
    14. Mendelsohn, Robert, 1994. "Property Rights and Tropical Deforestation," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 750-56, Supplemen.
    15. Marco Boscolo & Jeffrey R. Vincent, 2000. "Promoting Better Logging Practices in Tropical Forests: A Simulation Analysis of Alternative Regulations," Land Economics, University of Wisconsin Press, vol. 76(1), pages 1-14.
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