The Political Economy of Deforestation in the Tropics

Illegal logging ... increases dramatically in the years leading up to local elections.

Tropical deforestation accounts for almost one-fifth of greenhouse gas emissions worldwide. Because of Indonesia's substantial deforestation, that country is thought to be the world's third largest producer of greenhouse gases, after the United States and China. In The Political Economy of Deforestation in the Tropics (NBER Working Paper No. 17417), co-authors Robin Burgess, Matthew Hansen, Benjamin Olken, Peter Potapov, and Stefanie Sieber find that Indonesia's decentralized and relatively weak governmental controls over forest resources in the post-Suharto era have contributed to illegal logging and widespread deforestation.

The researchers use a satellite-based dataset that tracks annual changes in forest cover during the period of dramatic institutional change (2001-8) that followed the end of the 32-year Suharto regime. By combining detailed satellite imagery with data on competition between jurisdictions, on elections, and on local resource rents, these researchers show that local political-economy factors can help to explain the pattern of tropical deforestation in Indonesia. They find that increases in the numbers of competing political jurisdictions, along with localized controls of resources, are associated with lower prices in local wood markets and increased deforestation. Moreover, illegal logging, thought to be a core problem for natural resources management in the tropics, increases dramatically in the years leading up to local elections. They also find that when local political leaders have access to rents from local oil and gas reserves, that dampens their incentives to engage in illegal logging in the short term, but not in the medium term.

The results of this study suggest that in their efforts to encourage conservation in forest-rich countries like Indonesia, Brazil, and the Democratic Republic of Congo, policymakers should consider the incentives of the local officials and politicians who may be profiting from the exploitation of these resources. The authors here conclude that standard economic theories combined with innovative means of monitoring illegal extraction can offer powerful insights into what drives shortsighted and destructive resource management.

--Matt Nesvisky

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