Debt, Agricultural Expansion and Deforestation

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The debt crisis of developing countries lead up to the widespread adoption
of structural adjustment programs (SAP) during the 1980s. Thus this paper examines the hypothesis that heavy foreign debt causes high rate of tropical deforestation through forestland clearing for agricultural expansion. Following a discussion on the causal link between debt, agricultural expansion and deforestation, the paper also provides a modified theoretical model of agricultural expansion and deforestation. This model, which discusses two approaches, i.e. subsistence versus market approaches, for the farmers’ behavior on forestland clearing (deforestation) for agricultural production, was extended for the policy effect of credit constraint of the farmers on agricultural expansion and deforestation. Empirical evidences from tropical developing countries indicate that debt and deforestation are positively linked and that debt causes agricultural expansion.
Original languageEnglish
Title of host publicationProceedings of the Australian Conference of Economists, 2004
EditorsJeffrey Sheen
Place of PublicationSydney, Australia
PublisherUniversity of Sydney
Number of pages29
ISBN (Electronic)1864876646
Publication statusPublished - 2004
EventAustralian Conference of Economists - University of Sydney, Sydney, Australia, Australia
Duration: 27 Sept 200430 Sept 2004


ConferenceAustralian Conference of Economists


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