How Effective is Property Right to Deter Deforestation in Indonesia 2001-2005

Abstract

The rate of deforestation in Indonesia is higher than the world average. The lack of property rights could potentially result in overexploitation on forest resources. This paper argues that the presence of assigned property rights (natural forest concession) would prevent further deforestation in Indonesia. Using panel data estimation, the main result is that natural forest concession is negatively significant in influencing deforestation in Indonesia. This effect is explained by relatively high of the elasticity of deforestation rates with respect to area of assigned natural forest concession accounted for 0.33. This elasticity outweighs the positive significant effect of logs production in worsening deforestation in Indonesia. Keywords: deforestation, property right, natural forest concession, panel data