This paper provides a flexible model of resource extraction, such as deforestation, and derives the optimal conservation contract. When property rights are "strong" and districts are in charge of extracting their own resources to get revenues, conservation in one district benefits the others...

Motivated by tropical deforestation, we analyze (i) a novel theory of resource extraction, (ii) the optimal conservation contract, (iii) when the donor prefers contracting with central rather than local governments, and (iv) how the donor's presence may induce institutional change. Deforestation...