Development and Deforestation: evidence from Costa Rica

We estimate the drivers of deforestation in Costa Rica through the 20^th century. Deforestation rates in Costa Rica rise initially and then fall. Our empirical approach and panel data allow us to explore new questions on the dynamics of development and deforestation including early clearing of the most agriculturally productive and accessible lands, national trends in deforestation pressure, gradual adjustment after shocks to local agricultural profitability, and local endogenous development following early clearing. Our results are consistent with previous literature that focuses on forests stocks in that we find that potential agricultural returns and distances to market are important determinants of clearing. The results also highlight the important role of the development of government and market institutions and infrastructure at the local and national levels. Our results can help to predict patterns of agricultural development, to anticipate environmental pressures, and to predict deforestation baselines that could be used in the global climate change mitigation effort.