Demand for wood may lead to forest growth, not decline, study says

Under the right economic conditions, a growing demand for forest products that accompanies development may lead to an increase – not a decline – in forest cover, according to a new study by researchers at Brown University and Harvard University. Policies that focus on reducing paper demand may not necessarily increase forestation.

The study examined the connection between the economy and forest cover in India, a country with a relatively closed economy that experienced an apparent increase in forest growth in recent decades. Estimates obtained from satellite images of a sample of representative rural areas in India suggested an increase from about 10 percent forest cover in 1971 to about 24 percent in 1999.

“Concern about the phenomena of global warming and declining biodiversity has focused attention on the link between the world’s forests and economic growth,” said Andrew D. Foster, professor and chair of the Department of Economics at Brown. “By carefully structuring its policies, India set the stage for an increase in demand for this natural resource to lead to an increase in its supply.”

Foster conducted the study, published in the May 2003 Quarterly Journal of Economics, with Mark R. Rosenzweig, the Mohamed Kamal Professor of Public Policy at Harvard’s John F. Kennedy School of Government. Using satellite images of land use in rural India during nearly three decades, household survey data and census data, researchers sought to identify the underlying paths by which economic growth affects forests.

The increase in forest growth was not automatic, the researchers said. Several of India’s policies contributed to the forest increase: economic incentives such as providing people with a share of the revenue when timber was extracted from public forests (encouraging them to farm trees as they would another crop); conservation methods such as protection of forest areas and joint forest management; and trade policies that limited importation of forest products.

The growing demand for forest products –wood for newspaper, furniture and new homes – appeared to be met by planting new trees rather than further exploiting existing forests.

“The owners of forest resources had an incentive to increase the supply of trees in response to the increased demand because they reaped at least part of the reward from sale of the trees,” said Rosenzweig.

The nature of India’s economy enabled researchers to identify the relationship between economic growth and forest growth. India is a closed economy in which the demand for forest products was met by indigenous trees. In open economies – those in which forest products are traded broadly – there is no systematic relationship between economic growth and changes in forest cover, according to the researchers.

Foster and Rosenzweig began investigating whether economic factors such as agricultural productivity and wages were driving differences in forest change within India, but found that these processes could not explain an increase in India’s forests. Their findings do not support either of two explanations for forest growth previously discussed by economists: that increased agricultural productivity increases tree area by decreasing the need for expansion of agricultural lands; that growth in rural employment increases forests by moving labor out of forest-resource extraction.

The study was supported by grants from the National Institutes of Health and National Science Foundation.