What forests can tell us about gross domestic product – and vice-versa

A recent study by WU Professor Jesus Crespo Cuaresma, head of the Institute for Macroeconomics, shows the effects of inequality and economic changes on forestation levels, and with them, on the global ecosystem. The results are definitive: As poor countries become wealthier, deforestation leads to changes in forests and other natural resources. Crespo Cuaresma’s study is the first to find answers to how and why this happens.

The theory of a forestation-level related Kuznets curve, in which developing countries first massively deplete their forested areas en route to prosperity until average income reaches a certain point, after which forestation levels stabilize or even increase, has existed since the late 90s. Jesus Crespo Cuaresma and his colleagues from the International Institute for Applied System Analysis (IIASA) have now for the first time been able to confirm this theory. Unique study design WU Professor Jesús Crespo Cuaresma selected an innovative, interdisciplinary approach, working in cooperation with remote sensing experts and geologists to develop a unique study design. The key question was how changes in a country’s income affect its environment.

In this study, Jesús Crespo Cuaresma focused particularly on forestation levels.  The macroeconomist consulted satellite images and focused on national borders worldwide. Researchers then selected areas for analysis with similar climatic and geological conditions within a 50 km zone on both sides of the border. “It wouldn’t make much sense to compare income and forestation levels and observe the effects on two different countries if one of the two has no forest at all because it’s made up of desert or mountain ranges,” explains Crespo Cuaresma.

Lumber: A key resource

Massive deforestation has been taking place over the past few decades, especially in tropical regions and poor countries. In this study, Jesus Crespo Cuaresma observes changes in income in different countries and their individual forestation levels. The results show that poor countries with a growing economy have a higher deforestation rate. Once these countries reach a certain income level, however, deforestation rates stagnate and forested areas even start to recover. “Our assumption is that the massive increase in deforestation in poor countries is a result of these countries selling their lumber as a raw material and using wood as an inexpensive fuel source,” says Crespo Cuaresma. When a country’s gross domestic product reaches a level of 5,500 international dollars –the per capita income in Guatemala, for example – deforestation rates level out and forested areas can be expected to begin to increase again. “As soon as a certain level of prosperity has been reached, the intensity of forest use as a fuel source and as a commodity decreases. We also assume that at higher income levels, people can afford to be more environmentally conscious and have more time for recreational activities in the woods and other natural environments,” he explains.

A climate research milestone

The results of this study contribute a completely new aspect to the field of climate research and represent a significant step forward. “Forests are an inexpensive method of absorbing and storing CO2.  Combining the Kuznets curve with income scenarios will allow us to make predictions about the amount of forest we will have in the future and on whether deforestation is going to become more of a problem with regard to climate change,” says Crespo Cuaresma.