Does Trade Openness Cause Deforestation? A Case Study from Indonesia

Abstract

Forests are unique resources and environments because, in general, they provide many benefits. Changing the function of forest areas to other functions is inseparable from economic development. As a developing country, Indonesia's economy is still dependent on natural resources to support its development. Economic integration through trade openness plays a vital role in economic growth. Policies that enhance the country's ability to trade will help the economy to develop. The more open the trade regime will make the country specialize in semi-finished input products, its competitive advantage. However, economic integration also creates negative externalities in the form of increased deforestation. This study explores the effect of trade openness on deforestation using a panel data method in 20 provinces in Indonesia from 2008-2018. Not many studies have focused on trade openness, large plantations, and social interactions as the driving forces behind deforestation in Indonesia. From the estimation results of the model, it is known that trade openness, economic growth, and activities of logging and forest conversion each contribute to changes in forest cover. If the commodity price rises, it will impact decreasing forest cover. Also, increasing population and density have decreased forest cover because land outside the forest area is limited.

Deforestation-induced the EKC framework: The role of corruption control and trade openness in Southeast Asia

“…Trade openness is categorized as the underlying factor of deforestation. The empirical findings of Faria and Almeida (2016) and Kustanto (2022) confirm that trade openness and globalization are the top drivers of deforestation in tropical forests.…”

“…To the best of our knowledge, testing the EKC hypothesis for deforestation in Southeast Asia using a comprehensive panel method is still neglected. The previous articles by Thi & Nguyen (2018), Handalani (2019), andKustanto (2022) solely employed a within estimator (fixed effect model), which ignored some critical issues in panel data, i.e., dynamics processes and heterogeneity slope (Hill et al, 2020). Hence, this paper uses the Pooled Mean Group (PMG) estimator that can perform better in long panels (𝑇 > 𝑁).…”

Contributions to the Flora of Tropical East Africa

“…The acceleration of economic integration, the growing process of international trade liberalization and the intensification of human activities has created conditions for the long-distance migration and invasion, spread and dispersal of exotic species [ 39 ]. The risk of invasion of exotic organisms is increasing [ 40 ].…”

The Effect of Governance on Industrial Wastewater Pollution in China

“…This paper took the proportion of foreign direct investment in GDP as the degree of foreign investment in each province [ 24 , 25 ]. Trade openness is the basic index to measure the export-oriented degree of provincial economic development, which is conducive to the economic growth and transformation of various provinces [ 26 , 27 ]. However, the improvement of trade openness will lead to the expansion of the economic scale and an increase in pollution emissions.…”