TY - JOUR AU - Burgess,Robin AU - Hansen,Matthew AU - Olken,Benjamin A. AU - Potapov,Peter AU - Sieber,Stefanie TI - The Political Economy of Deforestation in the Tropics JF - National Bureau of Economic Research Working Paper Series VL - No. 17417 PY - 2011 Y2 - September 2011 UR - http://www.nber.org/papers/w17417 L1 - http://www.nber.org/papers/w17417.pdf N1 - Author contact info: Robin Burgess R524, Department of Economics and STICERD LSE Research Laboratory London School of Economics Houghton Street London WC2A 2AE UNITED KINGDOM Tel: 020-7955-6676 Fax: 020-79556951 E-Mail: r.burgess@lse.ac.uk Matthew Hansen Department of Geography 2181 LeFrak Hall University of Maryland College Park, MD 20742 E-Mail: mhansen@umd.edu Benjamin A. Olken Department of Economics MIT 50 Memorial Drive Cambridge, MA 02142-1347 Tel: 617/588-1437 Fax: 617/868-2742 E-Mail: bolken@mit.edu Peter Potapov Department of Geography 2181 LeFrak Hall University of Maryland College Park, MD 20742 E-Mail: peter.potapov@hermes.geog.umd.edu Stefanie Sieber The World Bank 1818 H Street, NW Washington, DC 20433 E-Mail: ssieber@worldbank.org AB - Tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide and threatens the world's most diverse ecosystems. The prevalence of illegal forest extraction in the tropics suggests that understanding the incentives of local bureaucrats and politicians who enforce forest policy may be critical to understanding tropical deforestation. We find support for this thesis using a novel satellite-based dataset that tracks annual changes in forest cover across eight years of institutional change in post-Soeharto Indonesia. Increases in the numbers of political jurisdictions are associated with increased deforestation and with lower prices in local wood markets, consistent with a model of Cournot competition between jurisdictions. Illegal logging increases dramatically in the years leading up to local elections, suggesting the presence of "political logging cycles". And, illegal logging and rents from unevenly distributed oil and gas revenues are short run substitutes, but this effect dissapears over time as political turnover occurs. The results illustrate how incentives faced by local government officials affect deforestation, and provide an example of how standard economic theories can explain illegal behavior. ER -