Poverty alleviation and deforestation in Brazil: empirical evidence from the Bolsa Escola/familia program : a difference-in-difference analysis of how increased income affects deforestation in brazilian municipalities

Abstract

In this thesis we estimate the effect of poverty alleviation on local deforestation in Brazil. We identify impacts of increased income among low-income families by studying the world’s largest conditional cash transfer program, Bolsa Escola/Familia. We use municipality-level panel data on deforestation and program beneficiaries for the first years of the program (2001- 2004). Through a difference-in-difference approach we estimate the average treatment effect on the treated (ATT). The results show that deforestation fell by 7,6% in municipalities with many beneficiaries, amounting to an estimated 1 million hectares of preserved forest in these locations. A back-of-the-envelope calculation suggest that these benefits are valued at approximately USD 4 650 million over these four years, which is almost three times the program costs. Furthermore, we estimate that increasing the share of beneficiary families by 10% on average leads to a reduction in deforestation by 1,7%. These findings suggest that the Bolsa program have reduced the local pressure on forests by providing low-income Brazilian families with greater financial stability. The thesis thus contributes to existing literature by providing new empirical evidence that poverty alleviation can be beneficial for the environment.