The impact of income, land, and wealth inequality on agricultural expansion in Latin America

Agricultural expansion remains the most prominent proximate cause of tropical deforestation in Latin America, a region characterized by deforestation rates substantially above the world average and extremely high inequality. This paper deploys several multivariate statistical models to test whether different aspects of inequality, within a context of increasing agricultural productivity, promote agricultural expansion (Jevons paradox) or contraction (land-sparing) in 10 Latin American countries over 1990-2010. Here I show the existence of distinct patterns between the instantaneous and the overall (i.e., accounting for temporal lags) effect of increasing agricultural productivity, conditional on the degree of income, land, and wealth inequality. In a context of perfect equality, the instantaneous effect of increases in agricultural productivity is to promote agricultural expansion (Jevons paradox). When temporal lags are accounted for, agricultural productivity appears to be mainly land-sparing. Increases in the level of inequality, in all its forms, promote agricultural expansion, thus eroding the land-sparing effects of increasing productivity. The results also suggest that the instantaneous impact of inequality is larger than the overall effect (accounting for temporal lags) and that the effects of income inequality are stronger than those of land and wealth inequality, respectively. Reaping the benefits of increasing agricultural productivity, and achieving sustainable agricultural intensification in Latin America, requires policy interventions that specifically address inequality.