Land Use and Road Improvements: A Spatial Perspective

The literature on whether new roads cause deforestation in developing countries has grown rapidly. However, improvements rather than new construction are increasingly common. Renovations are undertaken when prior maintenance expenditures have not been adequateor when economic or political considerations generate sufficient capital funds. As with new construction, the basic outcome of renovation is to lower transport costs. However, the cost reduction is often much less than that of the original road development. Hence, the potential for negative environmental effects is less clear and an understanding of location-specific effects is likely to be especially important. This article estimates econometrically a spatially explicit economic model of a proposed road improvement activity in Panama’s Darién province and simulates locationspecific effects on land use. The authors explore three estimation techniques that deal with different estimation issues. At least for this data set, multinomial nested logit and random parameters logit approaches provide roughly similar results.