Article publication « Public spending, credit and natural capital: Does access to capital foster deforestation? » by Jean-Louis Combes, Philippe Delacote, Pascale Combes Motel and Thierry Urbain Yogo in Elsevier review.
Vol 71, April 2018
Improving access to man-made capital through domestic credit and public spending is a step towards development. Developing countries rely also on natural capital, which may generate possible conflicts between environment and development targets.
Taking the case of land-use and deforestation, this paper revisits the links between man-made and natural capital. Relying on a model of income maximization, we theoretically assess how better access to man-made capital through public spending and credit, influences forest cover loss. Econometric investigations, over the period 2001–2012, show that forest cover loss is positively influenced by credit and public spending.
A better access to capital is thus detrimental to the forest.
This can be interpreted as a Tinbergen rule: the development objective of facilitating access to man-made capital cannot be tackled without facing the objective of environmental protection.