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W&L’s Kahn Participates in Landmark Study on Deforestation in Amazonas

James R. Kahn, the John F. Hendon professor of economics and director of the environmental studies program at Washington and Lee University, was a participant in a landmark study that concluded that economic incentives for manufacturing have been responsible for the low rate of deforestation in the State of Amazonas in Brazil.

Working alongside Brazilian colleagues at Instituto-PIATAM (a non-profit research center) and faculty members at the Universidade Federal do Amazonas, Kahn was part of a team that conducted intensive economic and statistical analysis as part of the project funded by Nokia and the Brazilian federal government.

The State of Amazonas, where Washington and Lee University has an exchange program with the Federal University of Amazonas, is a huge state of 1.5 million square kilometers that still retains 94 percent of its original forest cover. The research team was examining why deforestation been so slight in Amazonas at the same time that it has been much more rapid in the other states in the Amazonian region.

The hypothesis that was investigated was whether or not the economic incentives that the government provided for manufacturing in the capital city of Manaus created a comparative advantage for urban manufacturing as opposed to extractive activities in the forest.

The team’s analysis found that the economic incentives reduced deforestation 70 to 80% below what it would be in the absence of these incentives. In addition, the study concluded that an end to incentives would dramatically increase the level of deforestation and suggested that extending similar economic incentives to other regions of Amazonia could reduce future deforestation in those regions.

According to Kahn, the research is especially important in light of current political debate over whether these economic incentives are inefficient and should be ended.

The research team was led by Alexandre Rivas of Universidade Federal do Amazonas who is a collaborating professor at W&L and included José Arounda Mota of the Institute of Applied Economic Research of the Brazilian federal government and José Machado of the Universidade Federal do Amazonas. The project results were published in a book that contains all the analysis, conclusions, and policy implications. The volume, “Impacto virtuoso do Pólo Industrial de Manasu sobre a preteção da floresta amazonica: Discurso ou fato?” (The Beneficial impact of the Industrial Pole of Manaus with respect to the protection of the Amazonian forest: Talk or Fact?), was published in Portuguese. An English language version will be available in the winter of 2009.

A book-signing ceremony was held on Sept. 12 at the Fourth International Fair of Amazonia, which is a combination of exhibitions and scientific conferences. Kahn presented two papers in a session on the role of economic valuation and economic incentives in the sustainable development of Amazonia. Kahn author or co-authored three chapters of the book that was published from the papers given at the session.