Roads and deforestation: Do local institutions matter?

We study the role of subnational institutions in forest conservation in a context in which areas near roads are prone to deforestation. We develop an index of institutionalism to examine the extent to which local institutions can contribute to mitigate the road infrastructure’s adverse effect on deforestation. Using a large dataset from Peru, home to the second largest portion of the Amazon rainforest, we find that a higher value of our index of local institutions is significantly correlated with lower deforestation. However, the effect of our institutions index is not sufficiently large to offset the deforesting effect that closeness to roads has, at least not for relatively short distances to road. These results are robust to different specifications of our institutions index and to the inclusion of a large set of control variables.