The project aims to study the political-economic determinants of deforestation and land use change in Indonesian regions. The project follows two main goals. Its first goal is to upscale selected findings of the CRC 990 on the economic incentives driving land use change in Jambi province (Sumatra) from a nation-wide perspective. Focusing on the variation of economic in-centives at a larger analytical scale allows us to link relative shifts in global market demand for major agricultural commodities (among others, palm oil and rubber) to changes in deforestation pressure, conditional on the regional geo-climatic suitability for producing related crops. Build-ing on these results, the second goal of the project is to investigate how interactions between local economic and political incentives shape deforestation in Indonesian regions. The fiscal, administrative and political decentralization process, which started in 1999, devolved substan-tial decision making powers to the Indonesian regions. Among others, these reforms increased the importance of the local electoral cycle in shaping not only fiscal but also environmental outcomes as districts started issuing more deforestation permits right before mayoral elections. By focusing on the interactions between changes in commodity demand and political incen-tives, the project aims to understand how economic and political factors may reinforce each other. Results from these regional level analyses can be used as a basis for future collabora-tive work within the CRC to collect micro level evidence on the factors that shape the local governance environment for land use change.
The project will assemble a yearly panel dataset on 514 Indonesian districts (kabupaten and kota) for the years 2000-2015 and link variations in changes in land use and deforestation to political and economic factors. The analysis will utilize two sources of identifying variation. First, changes in economic incentives will be measured by interactions between changing world market prices (or total global demand) of major commodities and local geo-climatic suit-ability indices for the related crops. Second, the analysis will utilize the quasi-experimental variation in Indonesian local elections that followed a quasi-random, idiosyncratically timed pattern over the 2000s in order to link changing incentives within the local political cycle to changes in land use and deforestation. Moreover, we will analyse the interactions between changing world market prices of potentially locally relevant crops and the local political cycle to highlight the role of the political process in transmitting (or mitigating) the effects of global de-mand shocks.