An Econometric Model of Tropical Deforestation

A cross-sectional econometric model of tropical deforestation has been developed. Causes of tropical deforestation have been classified into two levels. The first-level (or direct) causes are grouped into two classes, i.e., pressure for forest products (for consumption and exports) and pressure on forest land for alternative (cropland and pasture) land uses. The most discussed causes of deforestation such as population, gross domestic product, external debt, government policies etc., are placed into second-level causes. The model, for a data set of 65 countries (35 African, 13 Asian, and 17 Latin American), is estimated in two stages by the heteroscedastic-consistent maximum-likelihood estimation procedure. In the first stage, the first-level causes are regressed on the second-level causes, and in the second stage, deforestation is regressed on the estimated first-level causes from the first stage. The model addresses three econometric issues i.e., the distinction between the first-level (direct) and the second-level (indirect) causes, the possibility of difference in the coefficients of explanatory variables across the geographic regions, and the problem of heteroscedasticity. The results of the estimated model are discussed in terms of the effect of different direct and indirect causes on deforestation in three geographic regions. On the basis of the elasticity of deforestation with respect to different first and second-level causes, some possible policy interventions in selected countries are also discussed.