Deforestation and Forest-Induced Carbon Dioxide Emissions in Tropical Countries: How Do Governance and Trade Openness Affect the Forest-Income Relationship?

Abstract

The objective of this article is to study the implications of changes in land use induced by economic growth, economy-wide policies, and governance on deforestation and forest-induced atmospheric carbon dioxide emissions. Economic growth, democracy, and trade policy explain an important share of the variation in two key determinants of deforestation: agricultural expansion and road building. The resulting shape of the Environmental Kuznets Curve for forests is influenced by governance as well as trade openness. Trade shifts the forest-income curve up (down) for countries that have a comparative disadvantage (advantage) in the production of crops encroaching on forest areas, such as Brazil and the Philippines (Indonesia and Malaysia). Amore democratic country will have a farther turning point than a less democratic country, but whether the Environmental Kuznets Curve shifts up or down is country specific.