This paper quantifies the relative footprint of trade and agricultural productivity on deforestation in Brazilian municipalities between 2000 and 2017. Using remote sensing data, it identifies distinct effects of these two phenomena on land use. Greater exposure to new genetically modified soybean seeds is associated with faster deforestation through agricultural land expansion. No significant association was found between local exposure to Chinese demand and deforestation, but exposure to trade with China mitigates the deforestation impacts caused by the new soybean technology. The results suggest that, when considered together, productivity gains that shift municipalities’ comparative advantage played a more significant role in increasing deforestation across Brazil than Chinese demand alone.

Researcher: Francisco Costa
EPGE Brazilian School of Economics and Finance (FGV EPGE)

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