Road Networks and Tropical Deforestation

We analyze a dynamic spatial model of deforestation in which roads facilitate agricultural expansion. The model's key innovation is that road construction costs decrease with the existing road stock, creating positive network externalities that are specific to infrastructure: each road built serves as a stepping stone for further road construction. Under open access, myopic producers fail to internalize that roads built today facilitate future road construction. As a result, the pace of deforestation is faster under a forward-looking regime of private property than open access, reversing a standard result from resource economics. We calibrate the model to the Brazilian Amazon, where cattle ranching is the primary driver of deforestation, and calculate the international transfer required to incentivize Brazil to implement a carbon tax that completely stops deforestation. We find that Brazil's extensive existing road network increases this required transfer, demonstrating how infrastructure creates ``deforestation lock-in'' that makes conservation progressively more expensive.