Relationship between openness to trade and deforestation: : Empirical evidence from the Brazilian Amazon

One of the objectives of this paper is to investigate how international trade has affected the dynamics of deforestation in the Brazilian Amazon at the level of the municipality. This analysis focuses on the expansion of crop and cattle activities, and other determinants of deforestation such as GDP per capita, conservation areas and property rights. We combine standard econometrics with spatial econometrics to capture the socioeconomic interactions among the agents in their interrelated economic system. The data used in this study correspond to a balanced panel of 732 municipalities from 2000 to 2010. The main findings suggest that as openness to trade in the Amazon increases, deforestation also increases. We also find that it is the production of soybeans and beef cattle that drives deforestation in the region. The property rights indicator also has a significant impact in deforestation. Moreover, as the GDP per capita goes up, deforestation increases. The conservation areas have a negative impact on deforestation.