Conventional wisdom says that farmers clear a forest because of their poverty. This paper shows a case in Indonesia where deforestation depends on the capital accumulation behavior of richer farmers and holders of capital.
Poverty is a deterrent to deforestation because the poorest farmers have inadequate capital to finance forest clearing and other associated costs. Analysis on financial and economic returns of deforestation shows that forest clearing and the subsequent agriculture produce high financial returns and more-than-sufficient liquidity for farmer to finance the next round of forest clearing. The 1997/98 economic crisis that hit Indonesia appears to provide favourable financial and economic conditions for increased deforestation.
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