Environmental Policy and Cattle Productivity in the Amazon
Marin Skidmore & Fanny Moffette
Department of Agricultural & Applied Economics
University of Wisconsin - Madison
Thursday, November 1, 2018
Taylor-Hibbard Seminar Room (Rm103)
3:45 pm-5:00 pm
Do anti-deforestation policies increase productivity and increase investment? If so, do they lead to a decrease in clearing? We study these questions in the context of cattle production in the Brazilian Amazon and consider two policies: the Priority Municipalities List, an increase in the intensity of fines for deforestation, and the Zero-Deforestation Cattle Agreements, a market exclusion mechanism. We compare ranchers' optimal behavior under both policies and extract predictions about how the policies will work, which type of agricultural actor will be affected and the expected combined effects of the two policies. Our hypotheses on individual and combined policy effects are tested with a spatial database that covers land-use in Brazil from 2006 to 2016 combined with a unique dataset of slaughterhouses locations that provides sample comparability by restricting our analysis to municipalities that ever had a nearby exporting slaughterhouse. We use the variations in time and exposure levels of the Priority Municipalities List and the Zero-Deforestation Cattle Agreements, and test their effects on cattle productivity, investment and clearing for pasture. We find that the Priority Municipalities List as well as the Zero-Deforestation Cattle Agreements increased productivity, with greater increase in investment following the Zero-Deforestation Cattle Agreements. However, results suggest that the policy did not provide additional forest protection, likely due to "lumpy" investments.