Is decentralization bad for conservation?

1. Daniela Miteva & Subhrendu Pattanayak Duke University Is decentralization bad for conservation?

2. Impact of decentralization on forests • Mixed evidence from empirical models • The outcome depends on the context • Different mechanisms at play! • Very fewstudies on the impact on conservation policies • Pfaff et al, 2011: Federal vs. State PAs • Engel et al (Forthcoming): game theoretic model between PA managers and communities

3. Impact of PAs on deforestation • Seem to work on average • Evidence from Latin America and Thailand mostly • Heterogeneity by PA type • Multi-use PA more effective than strict PAs at preventing forest fires (Nelson & Chomitz, 2011) • Heterogeneity by geographic attributes • PAs more effective close to cities (e.g. Ferraro et al, 2011; Nelson & Chomitz, 2011; Pfaff & Robalino, 2012) • PAs not effective in poor areas (Ferraro et al, 2011)

4. Decentralization in Indonesia • Significant increase in district government authority • District gov’t regulate logging • Significant increase in community role • Obtained weak property rights of forest resources • Can elect district governments • Corruption • Weak PA enforcement • District splitting: 292 districts in 1998 ->483 in 2008

5. General modeling framework Timber prices Quantities of logging permits (Cournot model) Other districts in the province (timber market) District government Corruption Logging firms Electoral participation Logging vs. no logging PAs effective or not Bargaining Communities

6. Communities vs. logging firms • Community net benefits • Benefits from forests (NTFP) • Benefits from PAs (tourism) • Costs from PAs (restricted access) Benefits=NTFP()+R(PA, type of PA, proximity to PA, ) • Logging company’s profit maximization • Timber prices • Logging permit prices (increase with electoral participation) • Costs of logging • Timber transport (location)

7. To log or not to log Firm willing to bargain Profits I II No bargaining Logging PAs ineffective Community willing to bargain Bargaining No bargaining No logging PAs effective III Logging unprofitable Community benefits Adapted from Engel et al (2006)

8. Optimal logging

9. If a strict reserve is introduced Firm willing to bargain Net revenue Community willing to bargain No bargaining Logging Bargaining No bargaining No logging Logging unprofitable Community benefits

10. If a national park is introduced Firm willing to bargain Profits No bargaining Logging PAs ineffective Community willing to bargain Bargaining No bargaining No logging Logging unprofitable Community benefits

11. Some predictions from the model • Electoral participation increases PA effectiveness(makes logging costlier) • PA effectiveness depends on the type of PA and the proximity to major cities (role of tourism) • IUCN II (national parks) close to major cities are likely to have the greatest impact • Baseline poverty & forest dependence are likely to decrease the effectiveness of PAs

12. Empirical specification • L*=fn(accessibility, proximity to ports, local markets and large cities, baseline forest, forest dependence, poverty, voters , presence & type of PA, timber prices) • DID matching methods (within a province) • PLM for heterogeneity Endogenous placement No data, change through time

13. Some preliminary results: PA effectiveness at preventing fires 1.5% 0.65%** 1% 0.38%** Probability of fire 0.5% -0.27%* 0 -0.5% High Low High Low Forest dependence Electoral participation

14. Key references • Burgess, R., Hansen, M., Olken, B. A., Potapov, P., & Sieber, S. (Forthcoming). The Political Economy of Deforestation in the Tropics. Quartterly Journal of Economics • Deaton, A. (2010),'Understanding the Mechanisms of Economic Development', Journal of Economic Perspectives, 24(3), 3-16. • Engel, S., López, R., & Palmer, C. (2006). Community–Industry Contracting over Natural Resource use in a Context of Weak Property Rights: The Case of Indonesia. Environmental and Resource Economics, 33(1), 73-93. doi: 10.1007/s10640-005-1706 • Fox, J. J., Adhuri, D. S., & Resosudarmo, I. P. (2005). Unfinished edifice or Pandora's box? Decentralization and resource management in Indonesia. In B. Resosudarmo (Ed.), The politics and economics of Indonesia's natural resources (pp. 92-108). Singapore: Institute of Southeast Asian Studies. • Larson, A. M., & Soto, F. (2008). Decentralization of Natural Resource Governance Regimes. Annual Review of Environment and Resources, 33(1), 213-239. doi: doi:10.1146/annurev.environ.33.020607.095522 • Miteva, D. A., Pattanayak, S. K., & Ferraro, P. J. (2012). Evaluation of biodiversity policy instruments: What works and what doesn't? Oxford Review of Economic Policy, 28(2). • Pfaff A, Robalino J, & Herrera LD (2011) Decentralization given environment-development tradeoffs: Federal versus state conservation and impacts on Amazon deforestation. Working paper • Ravallion, M. (2009),'Evaluation in the Practice of Development', The World Bank Research Observer, 24(1), 29-53. • Shleifer, A., & Vishny, R. W. (1998). The grabbing hand : Government pathologies and their cures. Cambridge, Mass.: Harvard University Press.