Description:

Marie-Louise Decamps (Northwestern University) - Agricultural Productivity and Deforestation

Abstract: I examine the effects of increasing agricultural productivity on the reallocation of agricultural activity across space, and on deforestation. I leverage the heterogeneous effects that the introduction of genetically engineered (GE) soybean seeds had on agricultural productivity across areas with different soil and weather characteristics, and satellite data on land use in Brazil from 1996-2010. I consider two sources of exposure to the shock. The direct exposure refers to the local increase in soy productivity. I find that it leads to changes in the local composition of agricultural land use, driven by the reduction in cattle ranching, but not to changes in forest area. Second, I consider the indirect exposure from proximity to areas with larger local increases in soy productivity. I find that cattle ranching activity reallocates to indirectly exposed areas, and leads to a reduction in forest area. This shows that changes in the composition of agricultural activity across space should be considered when examining the total environmental cost of local agricultural productivity shocks.