Journal
JOURNAL OF DEVELOPMENT ECONOMICS
Volume 97, Issue 2, Pages 427-436Publisher
ELSEVIER
DOI: 10.1016/j.jdeveco.2011.06.003
Keywords
Instrumental variable; Neighbors' interactions; Local interactions; Social interactions; Land use patterns; Environmental policies
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We estimate neighbor interactions in deforestation in Costa Rica. To address simultaneity and the presence of spatially correlated unobservables, we measure for neighbors' deforestation using the slopes of neighbors' and neighbors' neighbors' parcels. We find that neighboring deforestation significantly raises the probability of deforestation. Policies for agricultural development or forest conservation in one area will affect deforestation rates in non-targeted neighboring areas. Correct estimation of the interaction reverses the naive estimate's prediction of multiple equilibria. (C) 2011 Elsevier B.V. All rights reserved.
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