Pasture conversion and competitive cattle rents in the Amazon

The economic incentives for conversion to pasture in Mato Grosso Brazil are investigated using pastureland rents. Pastureland rents are estimated from physical and geographic determinants, and verified by predicting the location of conversion to pasture between 2001 and 2004. Results indicate that a one-hundred dollar increase in mean cattle rent increases the probability of conversion to pasture from 8.6 to 11.1%. The use of economic rent allows the direct study of fiscal policy levers on land conversion behavior, expanding policy discussions beyond the role of roads and road improvement towards the use of excise and conversion taxes, or conservation subsidies.