Analysis The relationship between technical efficiency in agriculture and deforestation in the Brazilian Amazon Sébastien Marchand ⁎ CERDI, Clermont Université, Université d'Auvergne, France abstract article info Article history: Received 22 February 2011 Received in revised form 20 February 2012 Accepted 23 February 2012 Available online 13 March 2012 Keywords: Tropical deforestation Agricultural productivity Stochastic frontier model Land use model Brazilian Legal Amazon This paper analyzes the impact of agricultural technical efficiency on the propensity of farmers to convert natural land into agricultural plots, i.e., to deforest, in the Brazilian Legal Amazon (BLA). A two-step econo- metric approach is adopted. A bootstrapped translog stochastic frontier that is a posteriori checked for func- tional consistency is used to assess technical efficiency and these estimates are put into a land-use model to assess the impact of productivity on deforestation. Analysis of agricultural census tract data suggests that technical efficiency has a U-shaped effect: both less and more efficient farms use more land for their agricul- tural activities and so have a positive effect on deforestation. However, the majority of farms in the BLA are on the ascendant slope, so that efficiency implies more deforestation in the BLA. The poor environmental valu- ation of the Brazilian forest, the uneven land distribution, and the problem of the de facto openly accessed for- ested and “unproductive” lands in the BLA could explain the U-shaped effect of technical efficiency on the conversion of forested land into agricultural land. © 2012 Elsevier B.V. All rights reserved. 1. Introduction The depletion of the Brazilian forest has drawn attention world- wide for decades and has been the subject of numerous studies (Andersen et al., 2002; Araujo et al., 2009; Chomitz and Thomas, 2003; Margulis, 2003; Pacheco, 2009a; Pfaff, 1999). This fact is of par- ticular importance since most Brazilian policy makers are aware that Brazil's future is closely linked with environmental issues. To date, there are serious concerns related to biodiversity loss, climate change, local ecological disturbances, soil erosion, and degradation of fresh water sources and soil fertility. This paper contributes to the inquiry into the economic drivers of deforestation at the farm level, by examining whether there exists a clear and unambiguous link between deforestation and agricultural efficiency. Put differently, this paper studies the trade-off between economic efficiency, in terms of agricultural productive efficiency, and environmental efficiency, in terms of preservation of forested land, in an attempt to determine whether efficient agricultural pro- ducers in the Brazilian Legal Amazon (BLA) also employ sound envi- ronmental practices. Many papers have analyzed the effect of efficiency and have revealed that inefficient farms (i.e., those with an extensive production) deforest more. But these analyses have been performed without empirically estimating the effect of produc- tivity (Bulte et al., 2007; Keil et al., 2007; Otsuki et al., 2002). For in- stance, Godoy et al. (1997, p. 978) explain that an “increase [in] the productivity of land (…) create(s) incentives to cut less forest.” How- ever, a potential increase in productivity could create incentives to convert more natural land when an efficient farmer is in a context of relatively poor environmental valuation, as in the Brazilian Ama- zon, implying that this kind of farmer does not internalize the social value of forest into their production decisions. This lack of internaliza- tion reduces the costs associated with the conversion option and effi- cient agricultural producers exploit extensive margins when they exist, before turning to intensive margins. Moreover, Angelsen (1999) theoretically explains that in an open economy and an open access model where property rights are de- fined by forest clearance, such as in the case of the Brazilian Amazon, an increase in output productivity enhances agriculture expansion, and thus deforestation. For instance, Pacheco (2009b, p. 40) argues that, in the state of Pará in the Brazilian Eastern Amazon, “wealthier farmers not only tend to deforest more in absolute terms but also show a slightly greater propensity to deforest whatever their produc- tion system.” Therefore, this study estimates potential impact of pro- ductivity defined as technical efficiency on agricultural expansion in the specific case of the Brazilian Legal Amazon, characterized by open access to forested and “unproductive” lands, as well as land con- centration and an active regional development policy. As far as I know, only Jones et al. (1995) have empirically analyzed this effect in the Brazilian context. They find that the stock of cleared land is lower in farms with higher productivity in cattle and cultivated land Ecological Economics 77 (2012) 166–175 ⁎ CERDI (Centre d'Etudes et de Recherches sur le Développement International), Université d'Auvergne 65, Boulevard F. Mitterrand, 63000 Clermont-Ferrand, France. Fax: +33 4 73 17 74 28. E-mail address: Sebastien.Marchand@u-clermont1.fr. 0921-8009/$ – see front matter © 2012 Elsevier B.V. All rights reserved. doi:10.1016/j.ecolecon.2012.02.025 Contents lists available at SciVerse ScienceDirect Ecological Economics journal homepage: www.elsevier.com/locate/ecolecon