Individual pay for collective performance: Evidence from deforestation in Brazil

Through the federal cash transfer program Bolsa Verde (BV), extremely poor households in remote protected areas (PAs) of the Brazilian Amazon receive cash conditional on maintaining the forest cover in their protected areas. Using high-resolution spatial data for 2005–2015 and difference-in-differences estimates, we find that the program reduces deforestation and the size of large deforestation plots. Measured as a share of the protected area, deforestation decreases by 0.08 percentage points when BV coverage increases from zero to its average level of 40% of PA households. This corresponds to one third of the post-program mean in comparable untreated areas. The effects are concentrated in unpopulated parts of PAs and outside private properties. Satellite-based alarm and enforcement data from Brazil further show that fines are issued at greater distances from alarm locations in BV areas. Together, these results are consistent with BV complementing formal enforcement through local monitoring and deterring large-scale deforestation unlikely to originate from recipients themselves. A back-of-the-envelope calculation suggests that the resulting avoided CO 2 emissions were achieved at relatively low abatement costs.