Protecting the Rainforest? The Effectiveness and Costs of Mahogany Prohibition Ariaster B. Chimeli Ohio University

Prohibition and Supply Standard Presumption Prohibition raises production costs. –“Imprisonment and other punishments”. Supply decreases. Equilibrium price increases. Equilibrium quantity decreases.

Prohibition and Supply Standard Presumption Becker, Murphy and Grossman, JPE, V. 114(1), 2006, p. 42.

Big Leaf Mahogany Highly valued timber in high end markets. Endangered species? Secondary deforestation.

Timeline for Brazilian Mahogany Regulation Early 1990s Jul-96Mar-99Jun-99Oct-01Apr-02Nov-02Nov-03 Export Quota 150,000m 3 IBAMA reviews mgt. plans 2 year moratorium new mgt. plans (renewed 98, 00) Mahogany in CITES II (rejected) Mahogany In CITES III EQ 65,000m 3 IBAMA report 85% mgt. plans suspended Fed. Gov. working group on mahogany meets EQ 30,000m 3 Mahogany prohibition Prohibition maintained Mahogany In CITES II CITES II regulation enters into force

Brazilian Big Leaf Mahogany

Prices and Quantities Chimeli and Boyd (2010)

Figure 2: Brazilian Exports of Mahogany

Figure 4: Brazilian Exports of Other Tropical Species

Combined series: EU P and Q

Combined series: US P and Q

Violence Chimeli and Soares I

Illegal Markets and Violence This paper: –Unique data: natural experiment involving a complete shut-down of a market –Not a “vice” good (mahogany).

Empirical Strategy Present evidence that mahogany trade persisted after prohibition as “other species” (structural breaks). Document (Diff-in-Diff) relative increase in homicide rates after prohibition at the municipal level.

Area of Natural Occurrence of Mahogany in the Brazilian Territory, according to Grogan et al (2002)

Figure 2: Evolution of Homicide Rates (per 100,000) in the State of Pará, Brazil,

Violence in Mahogany Municipalities Over 1,900 additional homicides (estimated) between 1995 to 2007 attributed to illegal mahogany activity. Typical victims are those opposing illegal logging. –Members of indigenous tribes (logging in their land). –Landless peasants. –Environmental activists. –Small farmers.

Five remaining members of the Akuntsu People. Rondônia, Brazil

Deforestation Chimeli and Soares II

Logging Industry and Tropical Deforestation in the World “Indirect role of timber production in opening up inaccessible forest areas, which then encourages other economic uses of forest resources, such as agricultural cultivation, that lead to deforestation on a wider scale.” Barbier et al. (1995), p Argument applied to: –Brazil, Indonesia, Cameroon and ‘major tropical countries’ (Amelung and Diehl, 1992; Barbier et al., 1995). –Thailand (Cropper et al., 1999).

Mahogany and Deforestation in the Brazilian Amazon “Moreover, mahogany logging indirectly contributes to regional deforestation. Logging companies have opened up some 3000 km of logging roads in southern Pará and mahogany logging has been documented in each of the region's 15 Indian Reserves. After logging, there is a growing trend to convert forests to cattle pasture, in part perhaps, because the prospects for future mahogany harvests do not appear to be good.” (Verissimo et al., 1995, p. 60).

Empirical Strategy Diff-in-Diff: forested area in mahogany vs. non-mahogany municipalities Dependent variables: –Forest/area (2000 – 2010) –Bovine density (1974– 2007) Treatment variables: –Mahogany prohibition (contemporaneous and lagged) –Areas where mahogany naturally occurs –Mahogany exports (weights at the state level)

Results Table 2: Illegality of mahogany trade and deforestation, municipalities in mahogany occurring states, Difference-in-differences SampleMahogany Occurring StatesPará Dependent Variable:Forest Cover/Municipality Area Mahogany Area x Treatment Year (1)(2)(3)(4) Treatment 2002 (L1) *** *** [ ] [0.0109] Treatment 2002 (L2) *** *** [ ] [0.0113] Constant **0.336*** [0.161][0.166][0.0223][0.0217] Observations4,242 1,024 R-squared Robust standard errors in brackets, clustering at municipality level. *** p<0.01, ** p<0.05, * p<0.1. All regressions include a constant, municipality and year dummies, and are weighted by population.

Results Table 4: Illegality of mahogany trade and bovine density, , Difference-in-differences. SampleAll StatesMahogany Occurring StatesPará Dependent Variable: Bovine heads/municipality area Mahogany Area x Treatment Year (1)(2)(3)(4)(5)(6) Treatment (L1)8.046***4.921***3.537* [1.424][1.524][2.012] Treatment 2002 (L1)17.19***13.10***13.21*** [2.070][2.196][3.176] Treatment (L2) 8.907*** 5.604*** 4.047** [1.319] [1.346] [1.630] Treatment 2002 (L2) 18.11*** 12.55*** 14.37*** [2.276] [2.341] [3.527] Constant25.23** ** ***6.588*** [12.39][13.84][30.52][30.15][1.947][2.068] Observations49,37744,4276,2535,6281,5251,398 R-squared Robust standard errors in brackets, clustering at municipality level. *** p<0.01, ** p<0.05, * p<0.1. All regressions include a constant, municipality and year dummies, and are weighted by population.

Results Policy evaluation: prohibition seemed to have increased mahogany extraction and deforestation in the Brazilian Amazon. –Decrease in forest cover in mahogany munic. –Increase in cattle following prohibition. Evidence in support of the hypothesis that logging of high-value timber species is a driving force of larger scale deforestation.