Smallholder labor and deforestation: A systems approach

The study examined the links between labor market opportunities and deforestation by jointly estimating a system of labor share equations for forest clearing, on-farm production, and off-farm employment. Findings reveal strong price effects in labor-allocation decisions. The negative cross-price term for off-farm returns in the forest clearing equation indicates that labor can be drawn away from the forest through price incentives in the off-farm sector, consistent with patterns observed in Nepal, Malawi, and elsewhere in the Philippines. The results also show that tenure security and current levels of borrowing are negatively correlated with the forest labor share. These findings suggest policies to reduce deforestation should focus on increasing returns to off-farm employment, strengthening rural credit markets, and ensuring farmers have secure tenure over existing agricultural land.