Considerable progress has been made in recent years in identifying the causes of deforestation in the Brazilian Amazon, the single largest Tropical Moist Forest (TMF) in the world that has not been completely depleted.
The destruction of tropical forests, in general, and the Amazon, in particular, have received worldwide attention because of the unique role they play in evolutionary and ecological terms, the diversity of functions they serve and the accelerating threat to their existence. In this respect, the environment literature has produced signficative advances by quantifying the benefits of conservation, and the likely impacts of deforestation for future generations.
The literature has also suggested a compelling set of policies to prevent further depletion in tropical forests. In fact, most authors agree on the public policies required to preserve the TMFs.
Nevertheless, if there is a consensus about the policy tools to preserve the Amazon, why don’t less developed countries (LDCs) adopt environmental policies (EPs)? In other words, why does the government insist on pursuing policies that may lead to a complete deforestation in the region? Is there any reason for the government to pursue a second best outcome? Is it possible to have a suboptimal outcome for an indefinite time? The answers to such questions, however, have been limited.
In the absence of control to prevent depletion, the system will reach a ‘point of no return’, where no EPs may reverse the damages caused by deforestation.
In this paper we propose a political economy framework to explain the reasons associated with the non-adoption of EP by LDCs, a suboptimal outcome. For this purpose, we confine our analysis to the Brazilian Amazon, a critical and extreme case where no EP have been proposed and thus, adopted.
In brief, we argue that in countries like Brazil, where a high degree of income inequality prevails as a rule, the set of EPs tend not to be adopted. A major aspect emphasized here is that EPs are not being delayed but rather, they simply are not implemented due to a conflict of interests among the groups in the society.
In fact, the question of why certain policies, which appear to be optimal, are not adopted while other policies which appear to be suboptimal are adopted is at the heart of political economy. The starting point of a political economy analysis is the realization that the paradigm of a social planner choosing policies does not describe the way decisions are actually made. Instead, policy choices often reflect the resolution of conflicts between groups with different goals; distortions away from optimality may result from the mechanisms for making collective choices. Recent work on delayed reform thus often starts with the question: why might conflicts of interest and the mechanisms by which such conflicts are resolved lead to a sub optimal policy choice?
There are two basic approaches in current research to explain non-adoption and/or delay of policy change. One approach concentrates on distributional conflict, as in the papers of Alesina and Drazen (1992) and Drazen and Grilli (1993). There is a conflict over how the known cost of a policy change will be divided among groups, so that ex-post heterogeneity (that is heterogeneity caused by policy changes) is the essential concept. Though each interest group knows the net benefit it would receive from the change under a proposed allocation of costs, each group is uncertain about the net benefits other groups will enjoy and hence about their willingness to pay for the reform.
In the second approach, the key concept is related to the presence of a ‘status quo’ group in the political and economic decisions that has members in power, as in Rodrick and Fernandez (1991) and Rodrick (1993), where non-adoption of beneficial reforms, rather than delay over time, is the focus. Heterogeneity nonetheless plays a role, in that some groups are certain to benefit from reform, so that there are reforms which would end up benefiting a majority of the population are not adopted if the system has a high degree of income inequality. Indeed, distinct groups may even have opposite preferences, according to his perceived degree of inequality.
In this paper we extend the second approach to explain the lack of EP in the Amazon. To face such a task we develop two models. The first one provides some rationality for the migration strategy adopted in the Amazon, a major cause of deforestation. In the second model, we present a stylized version of the static ‘prisoner’s dilemma’ game to explain ‘inaction’ (that is the absence of EP) due to a bias in the political arena: neither the congress or the government has an incentive to implement EPs in situations where a high income inequality prevails as a rule.
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