The Dynamics of Deforestation: evidence from Costa Rica

We estimate a deforestation equation for Costa Rica during the 20 th century, using an econometric approach following from a dynamic microeconomic model. While the theoretical model is similar to Stavins and Jaffe (1990), we use forest/non-forest transitions during discrete time periods, rather than forest shares at points in time. This permits us to empirically capture dynamics which reasonable theories posit may exist: exogenous development; endogenous development following early clearing; and short-run adjustment costs. Our results confirm the importance of agricultural productivity and distances as found in earlier research. Further they suggest that, at least within a development setting, agricultural/forest land use will be out of equilibrium as defined with respect to observable variables so that a dynamic approach provides additional insight and important controls. The results help to understand agricultural extensification and clearing patterns, and could provide a basis for carbon baseline projections within global regulation.