Sustainability of agricultural production following deforestation in the tropics: Evidence on the value of newly-deforested, long-deforested and forested land in the Brazilian Amazon

Tropical deforestation has typically been characterized as a process with persistent environmental costs (in the form of biodiversity and ecosystem services loss) and short-lived economic benefits (in the form of one-off timber harvests and agricultural fertility boosts). However, this characterization is largely based on agronomic study of tropical soils, and does not fully capture the long-term agricultural potential of cleared land. Landowners can make investments to improve fertility and raise productivity, extending the time horizons over which agriculture is profitable. Whether they choose to make these investments depends on available technologies, the relative prices of inputs and outputs, and the cost of the alternative strategy of clearing additional forest. There is little evidence on how agricultural productivity in the tropics changes over time for individual farmers, because regional development processes confound changes in land productivity when aggregate data are used. Understanding the trajectory of returns to land after tropical deforestation matters because the effectiveness of policies to limit deforestation, promote reforestation, and encourage agricultural intensification all depend on the values of forested and deforested land to farmers and the time horizons over which those values are maintained. This paper estimates the contributions of forested, newly-deforested, and long-deforested land to total property values reported by smallholders in established agrarian settlements in the western Brazilian Amazon. We find—during a decade in which the Brazilian government significantly strengthened its enforcement of forest laws—that deforested land retained its value, the value of forested land increased relative to cleared land, and the value of newly cleared land declined.