State - Local Community Games of Forest Land Appropriation

Abstract

This paper explores possible strategic interactions between the state and local community in games of tropical forest land appropriation. Two key questions are addressed. First, how does the structure of the game influence the extent of deforestation? Second, under which circumstances does higher forest appropriation by the state promote local deforestation? Three different cases are discussed, corresponding to a development over time towards increased forest land competition and integration of the local community into the national economy. Particular attention is given to the assumptions made about the local economy and the local costs of state deforestation. The local response to more state appropriation depends critically on these assumptions, and less on the structure of the game (Cournot or Stackelberg). The state will fuel local deforestation if state deforestation is associated with provision of infrastructure (roads) which reduces the local costs of agricultural expansion, or if the local economy is isolated (autarky) and local behaviour is determined by survival needs rather than income maximization.