Does log export ban policy a good strategy to fight deforestation? Lessons from developing countries

The log export ban (LEB) policy is an environmental, trade-restrictive, and industrialization measure adopted by many forest-rich developing countries. One of the primary reasons for implementing this policy is to combat deforestation, though its effectiveness remains debated. This paper evaluates the impact of LEB adoption on deforestation in developing countries through two main channels. Firstly, LEB adoption intensifies land competition between agriculture and forestry, leading to agricultural expansion and subsequent tree cover loss. Secondly, it reduces log prices, boosting wood utilization by the wood processing industry and exerting additional pressure on forest resources. This study is the first to establish LEB policy as a significant factor in deforestation within developing countries. Analyzing data from 124 developing countries with forest resources exceeding 100 km² from 2001 to 2019, we utilize an entropy balancing approach to address the self-selection biases associated with LEB adoption. Our findings indicate that LEB adoption leads to a significant 22.3% increase in deforestation compared to non-LEB countries. These results remain robust across various tests, including alternative measures of LEB and deforestation. Additionally, addressing potential endogeneity issues does not alter the policy's impact. We further explore an alternative methodology for staggered difference-in-differences, which confirms the positive and significant effect of the policy. These findings support the conclusion that the LEB policy exacerbates deforestation, leading to two distinct recommendations: first, the removal of the LEB policy; and second, the implementation of complementary measures, such as reinforced sustainable forest management and mechanized agriculture.