Do property rights promote investment but cause deforestation? Quasi-experimental evidence from Nicaragua

Zachary D. Liscow

Journal of Environmental Economics and Management, 2013, vol. 65, issue 2, 241-261

Abstract: Many policymakers argue that property rights decrease deforestation. Some theoretical papers also make this prediction, arguing that property rights decrease discount rates applied to a long-term investment in forestry. However, the effect is theoretically ambiguous. The paper takes a novel instrumental variables approach based on Nicaragua's agrarian reform to test for the effect, using a new dataset—Nicaragua's 2001 agricultural census. It finds that property rights significantly increase deforestation. The model, supported by the data, suggests a likely mechanism for this relationship: property rights increase investment, increasing agricultural productivity and therefore the returns to deforestation.

Keywords: Property rights; Deforestation; Investment (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (40)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeeman:v:65:y:2013:i:2:p:241-261

DOI: 10.1016/j.jeem.2012.07.001

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