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Structural adjustment and deforestation in Nicaragua

Published online by Cambridge University Press:  02 April 2001

SOLVEIG GLOMSRØD ,
MARIA DOLORES MONGE  and
HAAKON VENNEMO
SOLVEIG GLOMSRØD
Affiliation:
Statistics Norway, P.O. Box 8131 Dep., N-0033 Oslo, Norway. E-mail: [email protected].
MARIA DOLORES MONGE
Affiliation:
Instituto Centroamericano de Administracion de Empresas (INCAE), Managua, Nicaragua
HAAKON VENNEMO
Affiliation:
ECON Centre for Economic Analysis, P.O. Box 6823 St. Olavs plass, N-0130 Oslo, Norway. E-mail: [email protected].
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Abstract

This paper investigates the impact of structural adjustment policies on deforestation taking place when the agricultural frontier advances into forest reserves in Nicaragua. A computable general equilibrium model incorporating deforestation by squatters is used for policy simulations. The opportunity cost of migrating to the frontier does not simply depend on wage income opportunity, but also on market prices of basic grain which determine the capacity to consume beyond subsistence food-level given a certain real wage. Reducing public expenditures both conserves forests and enhances economic growth, while showing positive distributional effects. On the other hand, a strong conservation trend following a sales tax increase is driven by increasing poverty in rural areas. Noticeably, there are policies which initially intensify deforestation, but turn out to ease the pressure on forests over time. Rapid economic growth does not ensure less pressure on forest reserves.

Type
Research Article
Information
Environment and Development Economics , Volume 4 , Issue 1 , February 1999 , pp. 19 - 43
Copyright
© 1999 Cambridge University Press

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Footnotes

This study is carried out with financial support from The Research Council of Norway. We are indebted to Knut H. Alfsen for valuable research assistance, and to Ådne Cappelen, Torstein Bye and two anonymous reviewers for valuable comments.