Protecting the Rainforest?
The Effectiveness and Costs
of Mahogany Prohibition
Ariaster B. Chimeli
Ohio University
Prohibition and Supply
Standard Presumption
• Prohibition raises production costs.
– “Imprisonment and other punishments”.
• Supply decreases.
• Equilibrium price increases.
• Equilibrium quantity decreases.
Prohibition and Supply
Standard Presumption
Becker, Murphy and Grossman, JPE, V. 114(1), 2006, p. 42.
Big Leaf Mahogany
• Highly valued timber in high end markets.
• Endangered species?
• Secondary deforestation.
Timeline for Brazilian Mahogany
Regulation
Export Quota
150,000m3
Early 1990s
2 year moratorium
new mgt. plans
(renewed 98, 00)
1995
Jul-96
IBAMA reviews
mgt. plans
Mahogany
In CITES III
EQ 65,000m3
1997
Mahogany
in CITES II
(rejected)
1998
Mar-99
Fed. Gov.
working group
on mahogany
meets
Jun-99
IBAMA report
85% mgt. plans
suspended
Oct-01
Prohibition
maintained
Apr-02
EQ 30,000m3
Mahogany
prohibition
Nov-02
CITES II
regulation
enters
into force
Nov-03
Mahogany
In CITES II
Brazilian Big Leaf Mahogany
Prices and Quantities
Chimeli and Boyd (2010)
Figure 2: Brazilian Exports of Mahogany
Figure 4: Brazilian Exports of Other Tropical Species
Combined series: EU P and Q
Combined series: US P and Q
Violence
Chimeli and Soares I
Illegal Markets and Violence
• This paper:
– Unique data: natural experiment involving a
complete shut-down of a market
– Not a “vice” good (mahogany).
Empirical Strategy
• Present evidence that mahogany trade
persisted after prohibition as “other
species” (structural breaks).
• Document (Diff-in-Diff) relative increase in
homicide rates after prohibition at the
municipal level.
Area of Natural Occurrence of Mahogany in the
Brazilian Territory, according to Grogan et al (2002)
Figure 2: Evolution of Homicide Rates (per
100,000) in the State of Pará, Brazil, 1995-2007
Violence in Mahogany
Municipalities
• Over 1,900 additional homicides (estimated)
between 1995 to 2007 attributed to illegal
mahogany activity.
• Typical victims are those opposing illegal
logging.
– Members of indigenous tribes (logging in their
land).
– Landless peasants.
– Environmental activists.
– Small farmers.
Five remaining members of the
Akuntsu People. Rondônia, Brazil
Deforestation
Chimeli and Soares II
Logging Industry and Tropical
Deforestation in the World
• “Indirect role of timber production in opening
up inaccessible forest areas, which then
encourages other economic uses of forest
resources, such as agricultural cultivation,
that lead to deforestation on a wider scale.”
Barbier et al. (1995), p. 412.
• Argument applied to:
– Brazil, Indonesia, Cameroon and ‘major tropical
countries’ (Amelung and Diehl, 1992; Barbier et
al., 1995).
– Thailand (Cropper et al., 1999).
Mahogany and Deforestation in the
Brazilian Amazon
“Moreover,
mahogany
logging
indirectly
contributes to regional deforestation. Logging
companies have opened up some 3000 km of
logging roads in southern Pará and mahogany
logging has been documented in each of the
region's 15 Indian Reserves. After logging, there is
a growing trend to convert forests to cattle pasture,
in part perhaps, because the prospects for future
mahogany harvests do not appear to be good.”
(Verissimo et al., 1995, p. 60).
Empirical Strategy
• Diff-in-Diff: forested area in mahogany vs.
non-mahogany municipalities
• Dependent variables:
– Forest/area (2000 – 2010)
– Bovine density (1974– 2007)
• Treatment variables:
– Mahogany prohibition (contemporaneous and
lagged)
– Areas where mahogany naturally occurs
– Mahogany exports (weights at the state level)
Results
Table 2: Illegality of mahogany trade and deforestation, municipalities in mahogany occurring states, 2000 - 2010
Difference-in-differences
Sample
Dependent Variable:Forest
Cover/Municipality Area
Treatment 2002 (L1)
Mahogany Occurring States
Pará
Mahogany Area x
Treatment Year
Mahogany Area x
Treatment Year
Mahogany Area x
Treatment Year
Mahogany Area x
Treatment Year
(1)
(2)
(3)
(4)
-0.0295***
[0.00576]
Treatment 2002 (L2)
-0.0371***
[0.0109]
Constant
0.213
[0.161]
-0.0314***
[0.00681]
0.368**
[0.166]
Observations
R-squared
4,242
0.993
4,242
0.993
0.336***
[0.0223]
-0.0370***
[0.0113]
0.336***
[0.0217]
1,024
0.985
1,024
0.985
Robust standard errors in brackets, clustering at municipality level. *** p<0.01, ** p<0.05, * p<0.1.
All regressions include a constant, municipality and year dummies, and are weighted by population.
Results
Table 4: Illegality of mahogany trade and bovine density, 1992 - 2007, Difference-in-differences.
Sample
Dependent Variable: Bovine
heads/municipality area
All States
Treatment 2002 (L1)
(2)
(3)
(4)
(5)
8.046***
4.921***
3.537*
[1.424]
[1.524]
[2.012]
17.19***
13.10***
13.21***
[2.070]
[2.196]
[3.176]
Treatment 1999-2001 (L2)
Treatment 2002 (L2)
Constant
Pará
Mahogany Area Mahogany Area Mahogany Area Mahogany Area Mahogany Area Mahogany Area
x Treatment
x Treatment
x Treatment
x Treatment
x Treatment
x Treatment
Year
Year
Year
Year
Year
Year
(1)
Treatment 1999-2001 (L1)
Mahogany Occurring States
(6)
8.907***
5.604***
4.047**
[1.319]
[1.346]
[1.630]
18.11***
12.55***
14.37***
[2.276]
[2.341]
[3.527]
25.23**
16.01
74.59**
25.91
6.994***
6.588***
[12.39]
[13.84]
[30.52]
[30.15]
[1.947]
[2.068]
Observations
49,377
44,427
6,253
5,628
1,525
1,398
R-squared
0.944
0.958
0.924
0.943
0.893
0.902
Robust standard errors in brackets, clustering at municipality level. *** p<0.01, ** p<0.05, * p<0.1. All regressions include a constant,
municipality and year dummies, and are weighted by population.
Results
• Policy evaluation: prohibition seemed to
have increased mahogany extraction and
deforestation in the Brazilian Amazon.
– Decrease in forest cover in mahogany munic.
– Increase in cattle following prohibition.
• Evidence in support of the hypothesis that
logging of high-value timber species is a
driving force of larger scale deforestation.