The Effects of Transportation Infrastructure on Deforestation in the Amazon : A General Equilibrium Approach

Investments in transportation infrastructure can impact the environment beyond their immediate surroundings. This paper builds an interregional trade model to estimate the general equilibrium effects of changes in infrastructure on deforestation. Using panel data on the evolution of the transportation network in Brazil and land use data in the Amazon, the paper estimates the model and finds sizable effects of infrastructure on deforestation. Model simulations show that ignoring general equilibrium underestimates the impacts of deforestation by one-quarter. The paper also shows that the model can be used for evaluation of the deforestation induced by individual projects, which is an essential input for public policies