Forest Cover and Economic Development : A cross-country study on the relationship between forest cover and economic development in South America

Ongoing deforestation is an urgent, global issue with both direct and indirect impacts on a nation’s future development. This as change in forest cover and economic development provides an intuitive link between each other. Deforestation is driven by the expectations of economic return through exploitation of natural resources in search for economic development. The purpose of this paper is to investigate the relationship between change in forest cover and economic development in South America between 1991 and 2019. Even if deforestation is considered widely studied, it remains an empirical question how it relates to economic development. This study uses the framework of Environmental Kuznets Curve for Deforestation (EKCD), an economic theory which suggest that economic development has an inverted U-shaped relationship with deforestation. By using a fixed effect model, we find evidence of a U-shaped relationship between forest cover and income (GDP per capita). Our results indicate that a country’s forest cover decline as income raises until a turning point is reached, after which forest cover increases together with advancing economic development. Hence, provide empirical evidence of the existence of a U-shaped EKCD in South America. Furthermore, the study is conducted using average data and the turning point therefore is also an average for the continen