Séminaire

Cows and Trees

Paul Scott (University of New York, Stern School of Business)

12 juin 2023, 14h15–15h30

Salle Auditorium 4

Industrial Organization seminar

Résumé

We estimate a model of deforestation in Brazilian Amazonia with two sources of dynamics: deforestation costs and herd management. Following Rosen, Murphy, and Scheinkman (1994), cattle exhibit non-standard supply responses because of cattle's role as both output and capital stock. While herd size responds positively to persistent shocks to the price of beef, the response to short-run shocks is negative. The implication for understanding deforestation is that short-run correlations between deforestation rates and commodity prices can be misleading, and cattle dynamics must be taken into account when estimating how deforestation rates respond to commodity prices in the long run.