The Environmental Kuznets Curve for Deforestation
A Cross-Country Analysis and the Specific Case of the
Brazilian Amazon
Nicola Caravaggio
Tutor:
Conigliani, C.
Advisers:
Costantini, V. and Monni, S.
Outside Adviser:
Hyde, W.F.
Ph.D. in Economics
Environment, Development and International Relations
November 22, 2016
Roma Tre University, Rome
The importance of Forests
and the Deforestation Matter
Why are forests important?
•
•
•
•
Sinks of carbon dioxide
Habitat for biodiversity and conservation
Providers of important environmental services
Sustaining livelihood and economic opportunities
Monetary contributions of forests to the economies of the developing world exceed US$
250B. More than 13 million people are employed in forest sector activities in the formal sector,
another 40‐60 million in the informal sector. Furthermore, the number of people deriving direct
and indirect benefits from forests range between 1 billion ‐ 1.5 billion (Agrawal et al., 2013).
Nicola Caravaggio
Roma Tre University
The importance of Forests
and the Deforestation Matter
World's forest annual net loss
“In 1990 the world had 4,128 million ha of forest; by
2015 this area had decreased to 3,999 million ha. This is a
change from 31.6 percent of global land area in 1990 to
30.6 percent in 2015. […] There was a net loss of some
129 million ha of forest between 1990 and 2015, about
the size of South Africa, […] The rate of annual net loss
of forest has slowed from 0.18 percent in the 1990s to
0.08 percent over the last five-year period”.
(FAO, 2015, p. 3)
Source: FAO, 2016.
Nicola Caravaggio
Roma Tre University
The importance of Forests
and the Deforestation Matter
Forest area annual net change 1990 - 2015
Source: FAO, 2016.
Nicola Caravaggio
Roma Tre University
The Environmental Kuznets Curve
The economic growth is not necessarily related to an environmental degradation, on the contrary it can
lead to an increase in the environmental protection as remarked by the World Development Report 1992:
Development and the Environment (World Bank, 1992).
Most often, growth is initially related to an increase in the environmental degradation, consequently after
a certain threshold the trend divert. This relation is commonly explained with the so-called
Environmental Kuznets Curve (EKC).
Grossman and Krueger (1991) are the pioneers of this intuition. They applied the inverted u-shaped
relation between Gross Domestic Product (GDP) per capita and inequality proposed by Kuznets (1955)
to an environmental contest analyzing the possible environmental impacts of the NAFTA.
Their work has been followed by many others (e.g. Shafik and Bandyopadhyay, 1992; Panayotou, 1993;
1997; Selden and Song, 1994; Shafik, 1994; Grossman and Krueger, 1995) which considered different
environmental indicators including deforestation.
Nicola Caravaggio
Roma Tre University
The Environmental Kuznets Curve for Deforestation
The work conducted by Cropper and Griffiths (1994) focused specifically on this indicator pointing out
the presence of a possible u-shaped relation between growth and deforestation.
However, this relation between growth and environmental degradation has also received several criticisms
both theoretic and econometric, especially from Stern (2004).
Although EKC’s literature is almost boundless, studies which focus on the relation between GDP and
deforestation are still few if compared with other environmental indicators (e.g. CO2 emissions).
The main works which applied the EKC to the deforestation contest (e.g. Koop and Tole, 1999; Bhattarai
and Hamming, 2001; 2004; Culas, 2007; 2012) show different result, thus they find different areas where
there is an evidence for an EKC and different threshold point. Basically the existence of this
hypothesis is confirmed for Latin America and Africa but not for Asia countries.
Nicola Caravaggio
Roma Tre University
The Environmental Kuznets Curve for Deforestation
A recent meta-analysis conducted by Choumert et al. (2013) specifically about this relation points out how
recently studies which consider the relation between growth and deforestation tend to refuse the EKC
hypothesis.
Notwithstanding, Hyde (2014) stresses how the possible existence of an EKC for deforestation still
represents one of the twelve unresolved questions for forest economics.
“Therefore, we can reasonably speculate that, with development, the demands for the management and
protection of forests and trees eventually exceed both the demands to harvest them and the demands to
convert the forestlands to agricultural use. This conclusion is consistent with an EKC for forestry”.
(Hyde, p. 241, 2012)
Nicola Caravaggio
Roma Tre University
Research Question n. 1
In light of the whole literature about EKC, is it possible to carry out an
exhaustive analysis of the relation between growth and deforestation? If there is
an evidence for an EKC, it is possible to find some certain turning points?
EKC for Deforestation
Source: Culas, 2012.
Nicola Caravaggio
Roma Tre University
The EKC for Deforestation
• Introduction about forestry, its importance and the threaten of deforestation. Furthermore, I want to
highlight the role of forest in achieving the new SGDs (FAO, 2016).
• The Forest Transition hypothesis (FT) (e.g. Mather, 1992; Grainger, 1995). Differences and
similitudes between the EKC and the FT.
• Literature review of the relation between growth and deforestation, starting from the meta-analysis
of Choumert et al. (2013) (69 studies). The aim of this work is to analyze data, used variables,
methodology, and final outputs about the issue. A total basket of 106 works will be considered. The
realization of a meta-analysis is possible (in a different essay).
• A review of the main studies carried out within the EKC framework underling criticisms and
problems and possible ways to deal with them. Starting with the groundbreaking work related with
the EKC, the analysis will continue with the main reviews on the argument (e.g. Barbier, 2001;
Dasgupta et al., 2002; Carson, 2010; Van Alstine and Neumayer, 2010; Goldman, 2012) and the main
critiques (e.g. Levinson, 2002; Stern, 2004).
Nicola Caravaggio
Roma Tre University
The EKC for Deforestation
• Digression about the role of institution regarding the use of environmental resources such as forests,
thus the importance of property rights (e.g. Chichilnisky, 1994; 2004) and the management of
common goods (e.g. Ostrom, 1999; Gibson et al., 2000; Dietz et al., 2003).
• Examine the main problematics with the application of the EKC to deforestation (Shafik, 1994)
starting with the correct evaluation of forestry data (Allen and Barnes, 1985; Brown and Pearce,
1995; Hyde, 2012). Commonly studies about the EKC for deforestation tend to consider to not
diversify between different typologies of forests and between deforestation and reforestation. The
idea is to examine forestry data in deep trying to bring out these differences.
• The use of GDP as the main variable to account for growth. Evaluate the possibility to exploring
other alternatives in order to avoid cases of endogeneity (between GDP and deforestation rates) and
use a more accurate index of development and well-being (Kettner et al., 2012) following some
previous examples (e.g. Costantini and Martini, 2006; Jah and Murthy, 2003).
Nicola Caravaggio
Roma Tre University
The EKC for Deforestation
• Data collection (FAO, 2016) following the suggestions and the problematics underlined by Allen and
Barnes (1985) and Hyde (2012). Realization of a panel data for different regions: Latin America,
Africa, Asia, North America and Europe.
• The basic model:
𝑘
𝐷𝑒𝑓𝑖𝑡 = 𝛼𝑖 + 𝜆𝑡 + 𝛽1 𝐺𝐷𝑃𝑖𝑡 + 𝛽2 𝐺𝐷𝑃𝑖𝑡
2
+ 𝛽3 𝐺𝐷𝑃𝑖𝑡
3
+ ෍ 𝛽𝑗 𝑋𝑖𝑡 + 𝜀𝑖𝑡
𝑗=1
• Alongside GDP the willingness is to consider other different variables (control variables) in my
analysis. The main used in the literature are the following: Endowments, Institutions, Power Inequality,
Property Rights, Population; Technological Change; Macroeconomic Policy Variable, Price of
Agriculture, Price of Timber, Price of Meat, Economic Growth Rate, Forest Cover.
• Starting from a “classic” test for random and fixed effect and following with a dynamic panel data.
The final idea is to follow the work of Mazzanti et al. (2006), thus trying a Bayesian approach.
Nicola Caravaggio
Roma Tre University
Research Question n. 2
Is there an EKC for the Brazilian Amazon Rainforest?
14000
35000
12000
30000
10000
25000
8000
20000
6000
15000
4000
10000
2000
5000
Deforestation Rate (km2/y)
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
0
1988
0
Deforestation Rate (km2/y)
GDP per capita (constant 2010 US$)
Deforestation Rate and GDP Per Capita in Brazil (1988-2015)
GDP per capita (constant 2010 US$)
Source: World Bank, 2016; INPE, 2016. Personal elaboration.
Nicola Caravaggio
Roma Tre University
The EKC for the Brazilian Amazon Rainforest
• The Amazon Rainforest represents probably the greatest forest resource worldwide and the most
threatened one. Brazil hosts around 60% of the entire Amazon Rainforest and for this reason
would be interesting to study the EKC for this thought-provoking case.
• Furthermore, according to some main studies which accept the EKC for deforestation, Latin
America is an area where this hypothesis is verified (e.g. Cropper and Griffiths, 1994; Barbier and
Burgess, 2001; Bhattarai and Hamming, 2001; 2004; Culas, 2007; 2012). The idea is to verify if the
results about the EKC changes when the analysis moves from different level of aggregation.
• The analysis starts with an overview of the Brazilian forest framework. First a brief history of the
Brazilian deforestation, which started during the 70’s, underling what has been the main catalyst
drivers of this phenomena (e.g. Volpi, 2007; Araujo et al., 2009; Chowdhury and Moran, 2012).
Furthermore, the actual drivers of deforestation and the main reasons of the recent decrease in
deforestation rates (e.g. Nepstand, 2009; 2014; Arima et al., 2014). Eventually some theories about
the deforestation in South America, for example the boom-and-bust development pattern
(Rodrigues et al., 2009; Celentano and Veríssimo, 2007; Celentano et al., 2012).
Nicola Caravaggio
Roma Tre University
The EKC for the Brazilian Amazon Rainforest
• Polomé and Trotignon (2016) verified the existence of the EKC for deforestation in the Brazilian
case using time-series data with a cointegration approach for a time frame of 40 years (1975-2015).
• Araujo et al. (2009), focusing on the role of property rights for the Brazilian Amazon, conducted a
more State-level analysis with a reference period of 13 years (1988-2000). In their results, the
existence of the EKC is weakly confirmed.
• Gomes and Braga (2008) conducted another State-level analysis over 14 years (1990-2004) obtaining
different results between the use of a quadratic (u-shape curve, no existence of an EKC) or a cubic
(n-shape curve, existence of an EKC) equation of GDP. However, the international literature about
the specific application of the EKC to the Brazilian case is gaunt and sparse.
• Could be interesting to conduct a more disaggregated analysis (Municipality level) following some
previous works regarding the argument (Santos et al., 2008; Corrêa de Oliveira and Simões de
Almeida, 2011; Corrêa de Oliveira et al., 2011; De Brito et al., 2012; Tritsh and Arvor, 2016).
Nicola Caravaggio
Roma Tre University
The EKC for the Brazilian Amazon Rainforest
• The results of these Municipality-level-works concerning the EKC for the Brazilian deforestation do
not agree on the existence or not of the u-shape (or n-shape) curve. Therefore, new studies are
required, maybe following some previous studies applied to the Chinese case (e.g. Wang et al., 2007;
Hyde et al., 2008).
• Data collection (FAO, 2014; IBGE, 2016; INPE, 2016) trying to realize a panel data with the longest
data span and the more through possible. Different aggregation level will be taken into consideration
(microregions and mesoregions).
• Different additional variables are commonly considered. For example: Amount of Cattle Ranching,
Area of Soybean and Sugar Plantations, Extraction for Timber and Non-timber Use, Amount of
Timber in the Forest, Population Growth and Density, Rural Credit and Forest Area, Percentage of
the National GDP, Wages (average per worker), Number of Kills (proxy for institutions), Number of
Enrolled Students, and Technology (value of production related to area for plantations).
Nicola Caravaggio
Roma Tre University
The EKC for the Brazilian Amazon Rainforest
• The more suitable approach to study the phenomena would be to conduct a spatial analysis after
some “classic” tests for random and fixed effects.
• There is a plethora of different estimation methodologies as concern spatial analysis and several will
be taken into consideration, thus tested. Following the previous Research Question (n.1), a Bayesian
approach could be a choice. Furthermore, different other spatial approaches could be suitable too. For
example, the Geographically Weighted Regression (GWR) (Brunsdon et al., 1996), Spatial Vector
Autoregression (e.g. Beenstock and Felsenstein, 2007; Mutl, 2009) or Spatial Cointegration
(Beenstock and Felsenstein, 2008; Beenstock et al., 2012).
• The aim of this work is to verify if the existence for an EKC for deforestation is true or not for
different level of aggregation, from the National level to the Municipal level.
Nicola Caravaggio
Roma Tre University
Research Question n. 3
…is coming!
• Could be interesting to expand the previous study to a more wide number of countries, for example
the whole Latin America and Caribbean region (LAC), following for example the geo-spatial study on
deforestation and reforestation conducted by Aide et al. (2012).
• Alternatively, the previous Research Question (n.2) could be addressed with different level of
aggregation and methodologies.
• Eventually, a meta-analysis of the whole literature regarding the application of the EKC for
deforestation (thus an extension of the previous work of Choumert et al., 2013) could represent
another possible – and easier – essay to realize.
Nicola Caravaggio
Roma Tre University
Main References
Aide, T.M., Clark, M.L., Grau, H.R., López-Carr, D., Levy, M.A., Redo, D., Bonilla-Moheno, M., Riner, G., Andrade-Núñez, M.J., Muñiz, M., 2013.
Deforestation and Reforestation of Latin America and the Caribbean (2001–2010). Biotropica 45, 262–271.
Allen, J.C., Barnes, D.F., 1985. The causes of deforestation in developing countries. Annals of the Association of American Geographers 75 (2), 163–184.
Araujo, C., Bonjean, C.A., J.-L. Combes, J.L., Combes Motel, P., Reis, E.J., Property rights and deforestation in the Brazilian Amazon. Ecological
Economics 68 (8), 2461–2468.
Beenstock, M., Felsenstein, D, 2007. Spatial vector autoregressions. Spatial Economic Analysis 2 (2), 167–196.
Beenstock, M. Feldman, D., Felsenstein, D., 2012. Testing for Unit Roots and Cointegration in Spatial Cross-Section Data. Spatial Economic Analysis 7
(2), 203–222.
Bhattarai, M., Hammig, M., 2001. Institutions and the environmental Kuznets curve for deforestation: a crosscountry analysis for Latin America, Africa
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Nicola Caravaggio
Roma Tre University
Main References
Chichilnisky, G., 2004. Property Rights and Efficiency of Markets for Environmental Services. In: Kant, S. Berry, R.A. (Eds.), Sustainability, Institutions
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Nicola Caravaggio
Roma Tre University
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Nicola Caravaggio
Roma Tre University
Main References
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Nicola Caravaggio
Roma Tre University
Thank you for your attention!
Q&A
Nicola Caravaggio
Ph.D. in Economics
Environment, Development and International Relations
[email protected]
[email protected]
Nicola Caravaggio
Roma Tre University