UiS School of Business and Law Seminar: The Amazon Forest Fire – Export-Induced Deforestation

Abstract:
We analyze the effect of rising foreign demand for agricultural products on deforestation and elections in Brazil. Leveraging a set of rich data panels with two decades of detailed information on exports, land use, forest fires, and local politics, we exploit regional variations in agricultural export exposure stemming from the initial specialization in agricultural production and instrument for Brazilian exports using the spectacular growth of foreign imports from 1997 through 2019. We find that rising agricultural exports lead to deforestation. Furthermore, it also alters Brazilians' political attitudes and affects electoral results. In our main specification, a one standard deviation increase in export growth per capita increases land share for soybean plantation by 25 percentage points and right-wing and farmer candidates' vote share by 16 percentage points.