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Conservation by Lending

Author

Listed:
  • Harstad, Bard

    (Stanford U)

  • Storesletten, Kjetil

    (U of Minnesota Twin Cities)

Abstract

This project analyzes how a political incumbent can be motivated to conserve rather than exploit a depletable resource. This political economy problem is relevant for tropical deforestation as well as for other environmental problems. It is shown that the larger is turnover of policymakers (e.g., because of political instability), the more the principal benefits from conservation by lending compared to flow payments (in return for lower deforestation). Conservation by lending exploits the political incumbent's impatience (and time inconsistency) by offering a loan with repayments that are contingent on the forest cover.

Suggested Citation

  • Harstad, Bard & Storesletten, Kjetil, 2023. "Conservation by Lending," Research Papers 4120, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:4120
    as

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    File URL: https://www.gsb.stanford.edu/faculty-research/working-papers/conservation-lending
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    References listed on IDEAS

    as
    1. Bulow, Jeremy & Rogoff, Kenneth, 1989. "Sovereign Debt: Is to Forgive to Forget?," American Economic Review, American Economic Association, vol. 79(1), pages 43-50, March.
    2. Bård Harstad, 2023. "The Conservation Multiplier," Journal of Political Economy, University of Chicago Press, vol. 131(7), pages 1731-1771.
    3. Bård Harstad, 2020. "Technology and Time Inconsistency," Journal of Political Economy, University of Chicago Press, vol. 128(7), pages 2653-2689.
    4. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
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