Working Paper: NBER ID: w17417
Authors: Robin Burgess; Matthew Hansen; Benjamin A. Olken; Peter Potapov; Stefanie Sieber
Abstract: 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.
Keywords: deforestation; political economy; Indonesia; illegal logging; local governance
JEL Codes: D73; L73
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increases in the number of political jurisdictions (H73) | increased rates of deforestation (Q23) |
| increases in the number of political jurisdictions (H73) | drives down prices in local wood markets (L73) |
| political jurisdiction changes (H73) | illegal logging increases significantly in the years leading up to local elections (Q23) |
| local officials' effective discount rates increase as elections approach (E43) | incentivizing them to extract more resources (L72) |
| rents from illegal logging and oil and gas revenue sharing are substitutes in the short run (Q31) | this effect diminishes over time (C41) |