Deforestation and the environmental Kuznets curve: An institutional perspective

Institutions for secure property rights and better environmental policies for moving the system towards a sustainable growth path can reduce the height of an environmental Kuznets curve (EKC) relationship between income and deforestation. This study examines the impact of these specific institutional factors on the EKC relationship for deforestation across Latin American, African and Asian countries. The factors related to agricultural production, population, economy and governmental policies of each country are hypothesised to affect deforestation. Results of the Latin American countries show significant evidence of an EKC relationship for deforestation and also relevance of the institutional factors to reduce the rate of deforestation. Improvements in institutions for secure property rights and better environmental policies can thus significantly reduce the rate of deforestation without hindering the level of economic growth. Evidence also suggests that the effect of agricultural production on deforestation could be halted by strengthening institutional factors. There was found to be complementarity between the institutional factors and forest sector polices, and an additive effect between the institutional factors and forest products export promotion policies, which could also eventually reduce the rate of deforestation.