The advance of the agricultural frontier constitutes the biggest source of deforestation in Central America today. This conversion of tropical forests into agricultural land and pasture is the direct result of individual land use decisions. This paper presents a simple analytical model of household land use, followed by an econometric analysis of household survey data from the Río San Juan region of Nicaragua in order to test for consistency with the model. The results of the analysis are consistent with the theory that in frontier regions where factor markets function poorly, constraints on household resources drive patterns of land use. In particular, the increased access to financial resources instigates a transition from low-intensity agricultural production into more extensive cattle ranching, exacerbating deforestation. The preliminary conclusions of this paper suggest that there are no win-win solutions on the agricultural frontier; policy instruments that increase incomes in remote rural regions will exacerbate deforestation.[author]
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