deforestation in the tropics - summary
TRANSCRIPT
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
The Political Economy of Deforestation inthe Tropics
Burgess, Hansen, Olken, Potapov, and Sieber [2012]The Quarterly Journal of Economics (2012) 127 (4): 1707-1754
July 2, 2014
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Overview
Introduction
Literature
AnalysisBackgroundDataThe ModelEstimationResults
Policy Implications
Conclusions
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
◮ illegal logging one of major sources of deforestation
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
◮ illegal logging one of major sources of deforestation
◮ annually about 20.000 km2 deforested in the tropics
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
◮ illegal logging one of major sources of deforestation
◮ annually about 20.000 km2 deforested in the tropics
Idea
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
◮ illegal logging one of major sources of deforestation
◮ annually about 20.000 km2 deforested in the tropics
Idea
◮ Development of deforestation
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
◮ illegal logging one of major sources of deforestation
◮ annually about 20.000 km2 deforested in the tropics
Idea
◮ Development of deforestation
◮ Role of corruption
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Introduction
Stylized Facts
◮ counteracting climate change (Photosynthesis)
◮ illegal logging one of major sources of deforestation
◮ annually about 20.000 km2 deforested in the tropics
Idea
◮ Development of deforestation
◮ Role of corruption
◮ Connection of changes in political system anddeforestation
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’s
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’sSantilli et al. [2005]
◮ blaming ‘swidden’ agriculture on deforestation
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’sSantilli et al. [2005]
◮ blaming ‘swidden’ agriculture on deforestation
Barbier et al. [1995]
◮ analyze different policies such as export ban andexport tax
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’sSantilli et al. [2005]
◮ blaming ‘swidden’ agriculture on deforestation
Barbier et al. [1995]
◮ analyze different policies such as export ban andexport tax
Dauvergne [1993]
◮ corruption from political point of view
◮ criticizes Suharto regime
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’sSantilli et al. [2005]
◮ blaming ‘swidden’ agriculture on deforestation
Barbier et al. [1995]
◮ analyze different policies such as export ban andexport tax
Dauvergne [1993]
◮ corruption from political point of view
◮ criticizes Suharto regime
Palmer [2001]
◮ analysis of corruption and market failures due tomisplaced subsidies
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’sSantilli et al. [2005]
◮ blaming ‘swidden’ agriculture on deforestation
Barbier et al. [1995]
◮ analyze different policies such as export ban andexport tax
Dauvergne [1993]
◮ corruption from political point of view
◮ criticizes Suharto regime
Palmer [2001]
◮ analysis of corruption and market failures due tomisplaced subsidies
Olken [2006]
◮ empirical study to prove corruption
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Literature
Many papers stem from 90’s or early 00’sSantilli et al. [2005]
◮ blaming ‘swidden’ agriculture on deforestation
Barbier et al. [1995]
◮ analyze different policies such as export ban andexport tax
Dauvergne [1993]
◮ corruption from political point of view
◮ criticizes Suharto regime
Palmer [2001]
◮ analysis of corruption and market failures due tomisplaced subsidies
Olken [2006]
◮ empirical study to prove corruption
Fitrani et al. [2005]
◮ why do districts split?
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Sketch of Analysis
◮ logging firms make profits by felling trees andselling wood
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Sketch of Analysis
◮ logging firms make profits by felling trees andselling wood
◮ head of district makes money by selling loggingpermits to firms
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Sketch of Analysis
◮ logging firms make profits by felling trees andselling wood
◮ head of district makes money by selling loggingpermits to firms
◮ national governments determine legal quotas forlogging
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Sketch of Analysis
◮ logging firms make profits by felling trees andselling wood
◮ head of district makes money by selling loggingpermits to firms
◮ national governments determine legal quotas forlogging
◮ head of districts might sell more than legal
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Sketch of Analysis
◮ logging firms make profits by felling trees andselling wood
◮ head of district makes money by selling loggingpermits to firms
◮ national governments determine legal quotas forlogging
◮ head of districts might sell more than legal
◮ districts split due to decentralization → moreheads of districts
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Sketch of Analysis
◮ logging firms make profits by felling trees andselling wood
◮ head of district makes money by selling loggingpermits to firms
◮ national governments determine legal quotas forlogging
◮ head of districts might sell more than legal
◮ districts split due to decentralization → moreheads of districts
◮ more illegally sold permits → more deforestation
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator Suharto
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator SuhartoSuharto:
◮ former General who gained power by military putsch
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator SuhartoSuharto:
◮ former General who gained power by military putsch
◮ discrimination of certain ethnics and censorship ofmedia
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator SuhartoSuharto:
◮ former General who gained power by military putsch
◮ discrimination of certain ethnics and censorship ofmedia
◮ concentration of power
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator SuhartoSuharto:
◮ former General who gained power by military putsch
◮ discrimination of certain ethnics and censorship ofmedia
◮ concentration of power
◮ economic growth under the cost of corruption
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator SuhartoSuharto:
◮ former General who gained power by military putsch
◮ discrimination of certain ethnics and censorship ofmedia
◮ concentration of power
◮ economic growth under the cost of corruption
Decentralization since fall of Suharto regime
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Background
Asia crisis ended regime of dictator SuhartoSuharto:
◮ former General who gained power by military putsch
◮ discrimination of certain ethnics and censorship ofmedia
◮ concentration of power
◮ economic growth under the cost of corruption
Decentralization since fall of Suharto regime⇒ splits of districts
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
◮ red=deforested, green=forest, yellow=nonforest
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
◮ red=deforested, green=forest, yellow=nonforest
Different forest zones
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
◮ red=deforested, green=forest, yellow=nonforest
Different forest zones
◮ Production forest
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
◮ red=deforested, green=forest, yellow=nonforest
Different forest zones
◮ Production forest
◮ Conversion forest
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
◮ red=deforested, green=forest, yellow=nonforest
Different forest zones
◮ Production forest
◮ Conversion forest
◮ Conservation forest
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Moderate Resolution Imaging Spectroradiometer(MODIS) data set
◮ Satellite Data that count deforested area
◮ Count deforested pixels (250m × 250m)
◮ 438 images, equaling 34.6 million pixels (18.9 millionpixels are forest)
◮ red=deforested, green=forest, yellow=nonforest
Different forest zones
◮ Production forest
◮ Conversion forest
◮ Conservation forest
◮ Protection forest
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Figure : District level logging [Burgess et al., 2012]
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
Figure : Forest Cover Change Riau [Burgess et al., 2012]
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
First findings
◮ total deforestation 783,040 pixels (48,940 km2)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
First findings
◮ total deforestation 783,040 pixels (48,940 km2)
◮ Production forest 486,720 pixels
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
First findings
◮ total deforestation 783,040 pixels (48,940 km2)
◮ Production forest 486,720 pixels
◮ Conversion forest 179,360 pixels
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
First findings
◮ total deforestation 783,040 pixels (48,940 km2)
◮ Production forest 486,720 pixels
◮ Conversion forest 179,360 pixels
◮ Conservation forest 60,320 pixels
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
First findings
◮ total deforestation 783,040 pixels (48,940 km2)
◮ Production forest 486,720 pixels
◮ Conversion forest 179,360 pixels
◮ Conservation forest 60,320 pixels
◮ Protection forest 56,640 pixels
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Data
First findings
◮ total deforestation 783,040 pixels (48,940 km2)
◮ Production forest 486,720 pixels
◮ Conversion forest 179,360 pixels
◮ Conservation forest 60,320 pixels
◮ Protection forest 56,640 pixels
On average 113 pixels per district (annually)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Districts
Number of DistrictsProvince in 2000 in 2008NAD (Aceh) 13 23N. Sumatra 19 33W. Sumatra 15 19Riau 11 12Jambi 10 11S. Sumatra 7 15Bengkulu 4 10Lampung 10 14Bangka Belitung 3 7W. Kalimantan 9 14C. Kalimantan 6 14S. Kalimantan 11 13E. Kalimantan 12 14N. Sulawesi 5 15C. Sulawesi 8 11S. Sulawesi 21 24SE Sulawesi 5 12Gorontalo 3 6W. Sulawesi 3 5W. Papua 4 11Papua 10 29
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Parties involved
Logging companies
◮ profit maximizing through selling wood
◮ have to buy permit with price b in order to sell logslater on
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Parties involved
Logging companies
◮ profit maximizing through selling wood
◮ have to buy permit with price b in order to sell logslater on
Heads of District
◮ profit maximizing through selling permits b
◮ there’s a probability π that they are caught sellingtoo many permits
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Profit maximization of logging firms
maxqfdp(Q)qfd − cqfd − bdqfd (1)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Profit maximization of logging firms
maxqfdp(Q)qfd − cqfd − bdqfd (1)
Solving for the first order conditions, each firm is willingto pay a price for a permit up to
bd = p(Q)− c (2)
where Q is exogenous for the firms.
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Profit maximization of Heads of Districts
maxqdb(qd)qd − π(qd, q)rd (3)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Profit maximization of Heads of Districts
maxqdb(qd)qd − π(qd, q)rd (3)
Plugging in the first order condition of the firmsmaximization problem yields:
maxqdqdp
D∑
j=1
qj
− cqd − π(qd, q)rd (4)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Profit maximization of Heads of Districts
maxqdb(qd)qd − π(qd, q)rd (3)
Plugging in the first order condition of the firmsmaximization problem yields:
maxqdqdp
D∑
j=1
qj
− cqd − π(qd, q)rd (4)
Derive with respect to q
qdp′ + p− c− π′(qd, q)rd = 0 (5)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Assume functional form of inverse demand functionp = a/qλ with constant elasticity of demand 1/λ
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Cournot Framework
Assume functional form of inverse demand functionp = a/qλ with constant elasticity of demand 1/λ
Semi elasticity
1
Q
dQ
dn=
1
n2 − nλ(6)
This will be the parameter estimated later on
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
Fixed effect Poisson quasi maximum likelihood (QML)count model
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
Fixed effect Poisson quasi maximum likelihood (QML)count model⇒ Poisson regression standard tool for count models
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
Fixed effect Poisson quasi maximum likelihood (QML)count model⇒ Poisson regression standard tool for count models
◮ Poisson assumes positive integer numbers
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
Fixed effect Poisson quasi maximum likelihood (QML)count model⇒ Poisson regression standard tool for count models
◮ Poisson assumes positive integer numbers
◮ µ = exp(x′β) as mean specification⇒ λ might vary across individuals according tospecific function of x and β
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
Fixed effect Poisson quasi maximum likelihood (QML)count model⇒ Poisson regression standard tool for count models
◮ Poisson assumes positive integer numbers
◮ µ = exp(x′β) as mean specification⇒ λ might vary across individuals according tospecific function of x and β
◮ in case of Poisson regression, QMLE may correctlyidentify certain features of reality (such asconditional mean although distribution misspecified)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
Fixed effect Poisson quasi maximum likelihood (QML)count model⇒ Poisson regression standard tool for count models
◮ Poisson assumes positive integer numbers
◮ µ = exp(x′β) as mean specification⇒ λ might vary across individuals according tospecific function of x and β
◮ in case of Poisson regression, QMLE may correctlyidentify certain features of reality (such asconditional mean although distribution misspecified)
first order conditions of the general maximization problemof the Poisson QML estimator β:
N∑
i=1
(µ− exp(x′iβ))xi = 0 (7)
fulfilled in the case of E[µ|xi] = exp(x′iβ)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
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Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
As long as conditional mean is correctly specified theestimator will be consistent!⇒ do not even require dependent variable to be Poissondistributed
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
As long as conditional mean is correctly specified theestimator will be consistent!⇒ do not even require dependent variable to be Poissondistributed
Interpretation of coefficient knowing thatE(Q) = µpiexp(βn+ ηit)):
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
As long as conditional mean is correctly specified theestimator will be consistent!⇒ do not even require dependent variable to be Poissondistributed
Interpretation of coefficient knowing thatE(Q) = µpiexp(βn+ ηit)):
dQ
dn=µpiexp(βn+ ηit)β (8)
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
As long as conditional mean is correctly specified theestimator will be consistent!⇒ do not even require dependent variable to be Poissondistributed
Interpretation of coefficient knowing thatE(Q) = µpiexp(βn+ ηit)):
dQ
dn=µpiexp(βn+ ηit)β (8)
=Qβ (9)
β =dQ
dn
1
Q(10)
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Estimation
As long as conditional mean is correctly specified theestimator will be consistent!⇒ do not even require dependent variable to be Poissondistributed
Interpretation of coefficient knowing thatE(Q) = µpiexp(βn+ ηit)):
dQ
dn=µpiexp(βn+ ηit)β (8)
=Qβ (9)
β =dQ
dn
1
Q(10)
Semi elasticity
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Specification of quantity effect estimation
E(deforestpit) = µpiexp(βNumDistrictsInProvpit + ηit)
(11)
with
◮ deforestpit as the dependent variable counting thepixels declared as deforested
◮ µpi as a province fixed effect
◮ NumDistrictsInProvpit as the number of districts in aprovince
◮ ηit as an island × year fixed effect
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Specification of price effect estimation
Here they use official production data
log(ywpit) = βNumDistrictsInProvpit + µwpi + ηwit + ǫwpit
(12)
with
◮ log(ywpit) as the price or quantity of wood type w
harvested in province p and year t
◮ µwpi as a wood type by province fixed effect
◮ NumDistrictsInProvpit as the number of districts in aprovince
◮ ηwit as the wood type by island × year fixed effect
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Results (MODIS Data)
All ForestNumber of districts in province 0.039**
(0.016)Observations 608Number of districts in province 0.082**(sum of L0-L3)
(0.020)Observations 608
* p < 0.1; ** p < 0.05; *** p < 0.01
Table : Effects on quantities
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Results (Official Production Data)
All wood observationsLog price Log quantity
Number of districts in province -0.017 0.084*(0.012) (0.044)
Observations 1003 1003Number of districts in province -0.034** 0.135**(sum of L0-L3)
(0.013) (0.056)Observations 1003 1003
* p < 0.1; ** p < 0.05; *** p < 0.01
Table : Effects on prices and quantities
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Further Specifications: Substitutes
E(deforestdit) = µdiexp
(
βPCOilandGasdit+γNumDistrictsdit + ηit
)
(13)
◮ PCOilandGasdit per-capita oil and gas revenuereceived by the district
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Further Specifications: Substitutes
E(deforestdit) = µdiexp
(
βPCOilandGasdit+γNumDistrictsdit + ηit
)
(13)
◮ PCOilandGasdit per-capita oil and gas revenuereceived by the district
All forestOil and gas revenue -0.003**per capita (0.002)Observations 6464
* p < 0.1; ** p < 0.05; *** p < 0.01
Table : Substitutes
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
interpretation of coefficients of OLS regression
dlnQ
dn=
1
Q
dQ
dnand
dlnP
dn=
1
P
dP
dn(14)
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
interpretation of coefficients of OLS regression
dlnQ
dn=
1
Q
dQ
dnand
dlnP
dn=
1
P
dP
dn(14)
= semi elasticities
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
interpretation of coefficients of OLS regression
dlnQ
dn=
1
Q
dQ
dnand
dlnP
dn=
1
P
dP
dn(14)
= semi elasticities
1Q
dQdn
1P
dPdn
=
dQQ
dPP
=dQ
dP·P
Q(15)
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
interpretation of coefficients of OLS regression
dlnQ
dn=
1
Q
dQ
dnand
dlnP
dn=
1
P
dP
dn(14)
= semi elasticities
1Q
dQdn
1P
dPdn
=
dQQ
dPP
=dQ
dP·P
Q(15)
= price elasticity of demand
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
interpretation of coefficients of OLS regression
dlnQ
dn=
1
Q
dQ
dnand
dlnP
dn=
1
P
dP
dn(14)
= semi elasticities
1Q
dQdn
1P
dPdn
=
dQQ
dPP
=dQ
dP·P
Q(15)
= price elasticity of demand
official production data: -5.24
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
interpretation of coefficients of OLS regression
dlnQ
dn=
1
Q
dQ
dnand
dlnP
dn=
1
P
dP
dn(14)
= semi elasticities
1Q
dQdn
1P
dPdn
=
dQQ
dPP
=dQ
dP·P
Q(15)
= price elasticity of demand
official production data: -5.24MODIS data: -2.27
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
Recalling:
1
Q
dQ
dn=
1
n2 − nλfrom theoretical framework (16)
=1
n2 − n1ǫ
(17)
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
Recalling:
1
Q
dQ
dn=
1
n2 − nλfrom theoretical framework (16)
=1
n2 − n1ǫ
(17)
on average 5.5 districts per province (our n)
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
Recalling:
1
Q
dQ
dn=
1
n2 − nλfrom theoretical framework (16)
=1
n2 − n1ǫ
(17)
on average 5.5 districts per province (our n)
⇒ MODIS data set: 0.034
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Goodness of the model
Recalling:
1
Q
dQ
dn=
1
n2 − nλfrom theoretical framework (16)
=1
n2 − n1ǫ
(17)
on average 5.5 districts per province (our n)
⇒ MODIS data set: 0.034
⇒ Model gives exact short run predictions of semielasticities
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
Introduction
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The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
◮ harder punishments
Introduction
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The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
◮ harder punishments
Policy strategies
Introduction
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Analysis
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Data
The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
◮ harder punishments
Policy strategies
◮ export ban of raw logs
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
◮ harder punishments
Policy strategies
◮ export ban of raw logs
◮ permit for trees cut and not trees transported→ tell firms where to log
Introduction
Literature
Analysis
Background
Data
The Model
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References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
◮ harder punishments
Policy strategies
◮ export ban of raw logs
◮ permit for trees cut and not trees transported→ tell firms where to log
Other approaches
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
Conclusions
References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Policy Implications
Increase π
◮ increase top down monitoring
◮ creation of monitoring institutions
◮ harder punishments
Policy strategies
◮ export ban of raw logs
◮ permit for trees cut and not trees transported→ tell firms where to log
Other approaches
◮ educate people about consequences
Introduction
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Data
The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Conclusions
1. Satellite data do have additional explanatory power
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Conclusions
1. Satellite data do have additional explanatory power
2. decentralization even increases corruption
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Conclusions
1. Satellite data do have additional explanatory power
2. decentralization even increases corruption
3. subdividing jurisdictions can lead to moredeforestation
Introduction
Literature
Analysis
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The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Conclusions
1. Satellite data do have additional explanatory power
2. decentralization even increases corruption
3. subdividing jurisdictions can lead to moredeforestation
4. standard economics models help to explain illegalbehavior
Introduction
Literature
Analysis
Background
Data
The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Conclusions
1. Satellite data do have additional explanatory power
2. decentralization even increases corruption
3. subdividing jurisdictions can lead to moredeforestation
4. standard economics models help to explain illegalbehavior
5. infer actions to counteract corruption from model
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Questions
◮ why does deforestation increase in particular illegalzones?→ role of roads and infrastructure in general
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Questions
◮ why does deforestation increase in particular illegalzones?→ role of roads and infrastructure in general
◮ measurement: legal logging taking place via fellingindividual trees
Introduction
Literature
Analysis
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Data
The Model
Estimation
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Questions
◮ why does deforestation increase in particular illegalzones?→ role of roads and infrastructure in general
◮ measurement: legal logging taking place via fellingindividual trees
Doubts and other explanations of deforestation
Introduction
Literature
Analysis
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The Model
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Questions
◮ why does deforestation increase in particular illegalzones?→ role of roads and infrastructure in general
◮ measurement: legal logging taking place via fellingindividual trees
Doubts and other explanations of deforestation
◮ decline in enforcement
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Questions
◮ why does deforestation increase in particular illegalzones?→ role of roads and infrastructure in general
◮ measurement: legal logging taking place via fellingindividual trees
Doubts and other explanations of deforestation
◮ decline in enforcement
◮ changes in legal logging quotas
Introduction
Literature
Analysis
Background
Data
The Model
Estimation
Results
Policy
Implications
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References
Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Edward B Barbier, Nancy Bockstael, Joanne C Burgess,and Ivar Strand. The linkages between the timbertrade and tropical deforestation-indonesia. The World
Economy, 18(3):411–442, 1995.
Robin Burgess, Matthew Hansen, Benjamin A Olken,Peter Potapov, and Stefanie Sieber. The politicaleconomy of deforestation in the tropics*. TheQuarterly Journal of Economics, 127(4):1707–1754,2012.
Peter Dauvergne. The politics of deforestation inindonesia. Pacific Affairs, pages 497–518, 1993.
Fitria Fitrani, Bert Hofman, and Kai Kaiser*. Unity indiversity? the creation of new local governments in adecentralising indonesia. Bulletin of Indonesian
Economic Studies, 41(1):57–79, 2005.
Benjamin A Olken. Corruption and the costs ofredistribution: Micro evidence from indonesia. Journalof public economics, 90(4):853–870, 2006.
Introduction
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Christoph Schulze - Masterseminar: Topics in Empirical Public Economics
Charles Palmer. The extent and causes of illegal logging:An analysis of a major cause of tropical deforestationin indonesia. 2001.
Marcio Santilli, Paulo Moutinho, Stephan Schwartzman,Daniel Nepstad, Lisa Curran, and Carlos Nobre.Tropical deforestation and the kyoto protocol.Climatic Change, 71(3):267–276, 2005.