Institutional Constraints and the Forest Transition in Tropical Developing Countries
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The forest transition describes a reversal or turnaround in long-run land-use trends for a country or region from a period of net forest area loss to net gain. Following North, this paper constructs a model to show that effective institutions may impose additional costs on a representative economic agent converting forests to agriculture in a tropical developing country. The main outcome to emerge from the model is that an improvement in institutions accelerates the onset of a forest transition. This hypothesis is tested by examining the probability of a forest transition occurring for 101 tropical developing countries over 1990 to 2015. The empirical results suggest that the hypothesis cannot be fully rejected. However, not all the institutional indicators analyzed affect the likelihood of the forest transition, and one economy-wide indicator appears to delay the transition. Nevertheless, the results illustrate the importance of understanding how institutional indicators affect the decisions of economic agents concerning land clearing as well as forest management practices and policies.
KeywordsDeveloping countries Forest policy Forest transition Tropical deforestation
JEL ClassificationQ23 Q24 O13
Paper presented at the 85th International Atlantic Economic Conference, London, United Kingdom, 14-17 March 2018. I am grateful for comments provided by Keisaku Higashida, Don Larson and session participants.
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