A Dynamic CGE Model of Deforestation in Costa Rica

Abstract

Deforestation in Costa Rica is proceeding at a rapid pace, and there is a growing concern about this both inside the country and from environmental organisations in the rest of the world. Ministerio de Recursos Naturales, Energia y Minas [1990] mentions the following economic and ecological benefits that Costa Rica may lose if deforestation continues: access to construction materials and other wood products, species of plants and animals that have possible and future uses for consumption and industrial production; recreation and ecotourism; control of erosion and sedimentation; and education and research possibilities. The greenhouse effect and concerns about the rich biological diversity in Costa Rica may, in addition, be important to other countries and environmental organisations.

This paper was written as part of a World Bank project on Economywide Policies and the Environment. I am particularly grateful to Dr. Mohan Munasinghe of the World Bank, Professor Karl Göran Mäler, the Beijer Institute, Professor Lars Bergman, Stockholm School of Economics, and Professor Dale W. Jorgenson, Harvard University, for their valuable comments and support. Of course, all remaining mistakes are my own.