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Forest Fallow Ecosystem Services: Evidence from the Eastern Amazon

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  • Heather Klemick

Abstract

With tropical deforestation a major contributor to greenhouse gas emissions and biodiversity loss, the land-use decisions of small-scale farmers at the forest margins have important implications for the global environment. Farmers’ incentives for maintaining forest fallow in a shifting cultivation agricultural system depend upon the market and non-market services it provides to them. This study estimates the value of those services, including hydrological externalities that may affect other farms downstream. The analysis uses cross-sectional farm-level survey data from the Zona Bragantina in the Eastern Brazilian Amazon to assess the value of forest fallow to farmers and test whether it provides local externalities. I estimate production functions for crops and forest products to determine the contributions of on-farm and off-farm forest fallow to income from these two activities. Instrumental variables and spatial econometric approaches help address issues of endogeneity and variation in unobservable factors over space. I use geographic information on the location of farms to obtain data on external forest fallow and to model the hydrological externality as an upstream-to-downstream process. The results indicate that fallow does contribute significantly to productivity both on-farm and downstream, boosting income from both crops and forest products. In addition, most farms appear to allocate sufficient land to fallow, accounting for both the value of hydrological spillovers and the opportunity cost of land left out of cultivation. These results suggest that farming communities may have some self-interest in preserving forest cover locally—a finding that may bolster policy efforts aimed at conserving tropical forests.

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File URL: http://yosemite.epa.gov/ee/epa/eed.nsf/WPNumber/2008-05/$File/2008-05.PDF
File Function: First version, 2008
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Bibliographic Info

Paper provided by National Center for Environmental Economics, U.S. Environmental Protection Agency in its series NCEE Working Paper Series with number 200805.

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Length: 53 pages
Date of creation: May 2008
Date of revision: May 2008
Handle: RePEc:nev:wpaper:wp200805

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Related research

Keywords: Forests; Farms; Fallow; Ecosystem services; Land use; Spatial econometrics; Externalities; Brazil;

References

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  1. Subhrendu K. Pattanayak & Erin O. Sills, 2001. "Do Tropical Forests Provide Natural Insurance? The Microeconomics of Non-Timber Forest Product Collection in the Brazilian Amazon," Land Economics, University of Wisconsin Press, vol. 77(4), pages 595-612.
  2. Yoko Niimi, 2005. "An Analysis of Household Responses to Price Shocks in Vietnam: Can Unit Values Substitute for Market Prices?," PRUS Working Papers 30, Poverty Research Unit at Sussex, University of Sussex.
  3. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-21, May.
  4. Pattanayak, Subhrendu K. & Kramer, Randall A., 2001. "Worth of watersheds: a producer surplus approach for valuing drought mitigation in Eastern Indonesia," Environment and Development Economics, Cambridge University Press, vol. 6(01), pages 123-146, February.
  5. A. W. Coats, 1996. "Introduction," History of Political Economy, Duke University Press, vol. 28(5), pages 3-11, Supplemen.
  6. Klemick, Heather, 2008. "Do Liquidity Constraints Help Preserve Tropical Forests? Evidence from the Eastern Amazon," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6473, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Subhrendu K. Pattanayak & David T. Butry, 2005. "Spatial Complementarity of Forests and Farms: Accounting for Ecosystem Services," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 995-1008.
  8. George E. Battese, 1997. "A Note On The Estimation Of Cobb-Douglas Production Functions When Some Explanatory Variables Have Zero Values," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1-3), pages 250-252.
  9. Lopez, Ramon, 1997. "Environmental externalities in traditional agriculture and the impact of trade liberalization: the case of Ghana," Journal of Development Economics, Elsevier, vol. 53(1), pages 17-39, June.
  10. Chomitz, Kenneth M & Kumari, Kanta, 1998. "The Domestic Benefits of Tropical Forests: A Critical Review," World Bank Research Observer, World Bank Group, vol. 13(1), pages 13-35, February.
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