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This paper analyzes the determinants of deforestation in the Brazilian Amazon. From a model of optimal land use, it derives and then estimates a deforestation equation on county-level data for the period 1978 to 1988. The data include a deforestation measure from satellite images which is a great advance in allowing within-country analysis. Evidence exists that: most important for policy, both increased road density in a county and increased road density in neighboring counties lead to more deforestation; government development projects increase deforestation; greater distance from the economic center of the country leads to less deforestation; and better soil quality leads to more deforestation. The evidence on provision of subsidized credit is mixed. Addressing an oft-mentioned factor, the population density is significant when population is the sole explanatory variable, but not when other variables suggested by the model are included. A quadratic population specification yields a more robust (although still small), concave effect, suggesting the importance of the spatial distribution of population. 1 I want to thank in particular Richard Schmalensee, Rob Stavins, Jon Gruber, and Robert Solow for continuing support of and advice on this project. I also want to thank Jim Poterba, Kaivan Munshi, Amy Ando, Maureen Cropper, Richard Eckaus, David Genesove, Donald Marron, Bill Miracky, Chris Sanchirico and Matt Slaughter for helpful discussions, and participants in the MIT Public Finance Lunch and Seminar, MIT Economic History and Development Seminar, Harvard Environmental Economics and Policy Seminar, and Columbia Applied Microeconomics Lunch for helpful comments. I gratefully acknowledge funding from: a National Science Foundation graduate fellowship, the Schultz Fund, the University of Florida/FLAS, the Social Science Research Council's International Predissertation Fellowship Program, the MIT World Economy Lab, and the MIT Joint Program on the Science and Policy of Global Change. On another front, after much searching I discovered that David Skole at the University of New Hampshire had collected state of the art satellite vegetative land cover data, and that Eustaquio Reis at the Institute for Applied Economic Research in Rio de Janeiro (IPEA/Rio) had collected a fantastic databank for the Amazon. Both during my extended visit at IPEA/Rio and during my work at MIT, their efforts and those of their colleagues have helped me greatly in using these datasets. Among their colleagues, I want to thank in particular Walter Chomentowski at UNH, and Maria Jose Silveira Pessoa and the computational staff at IPEA/Rio. In making their data available to me and in their ongoing contributions, these two groups have been absolutely crucial in making this paper possible.

What Drives Deforestation in the Brazilian Amazon? Evidence from Satellite and Socioeconomic Data