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Market Integration, Development, and Smallholder Forest Clearance

A significant proportion of deforestation in Latin America is caused by smallholders living at the frontier of modern rural markets. This paper develops a household model that examines the roles of market integration, subsistence, time preference, and non-timber forest uses in the household’s decision to clear forest for future agriculture. The model explores the possible impacts of development programs that encourage market integration. The model shows that rates of forest clearance should be exacerbated in areas in which market integration is most rapid. An empirical estimation, using household data from the Tsimane people of Bolivia, tests hypotheses from the model. (JEL Q23)