Cutting Special Interests by the Roots

Abstract

Government policies may impact economic outcomes directly but also indirectly through effects on political incentives. This paper examines the effects of the PPCDAm, a centralized set of environmental policies that effectively raised the expected cost of illegal deforestation, on the behavior of a powerful special-interest group operating in the Brazilian Amazon: farmers. Using different identification strategies, we document that municipalities governed by farmer politicians experienced larger declines in deforestation, greenhouse gas (GHG) emissions, and violence than municipalities governed by other politicians after this set of policies was implemented. Our findings suggest the PPCDAm had indirect and persistent effects on political incentives, amplifying its impact on environmental and social outcomes.