Foreign Demand, Soy Exports, and Deforestation

In this project, we evaluate the credibility of demand-side policies to curb deforestation patterns. Demand-side policies are considered important drivers of deforestation and soy demand. The academic literature remains mostly silent regarding its potential impacts. We focus on the universe of trade in soy, originating from Amazonia, using disaggregated export and production data at the municipality – exporter – destination and year level (TRASE). We estimate whether changes in foreign demand are related to soy exports and soy-related deforestation. Then, we evaluate the role played by soy exporters’ networks and market structure in shaping this elasticity. Finally, we focus on potential aggregation bias when estimating this elasticity.