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Environmental degradation and economic development are two of the most pressing issues facing the world today, and public policy that aims to address one of these may unintentionally affect the other. I study the effect of an increase in environmental law enforcement on local economic conditions in rural Brazil. In the first part of this paper, I use data on more targeted anti-deforestation law enforcement activities, guided by satellite alerts, and link that to local forest conversion. I then exploit the staggered introduction of a policy that increases monitoring and enforcement in municipalities with a history of high deforestation, and link this to a range of economic development outcomes. I find that more targeted law enforcement reduces conversion rates of forest to farm land. Furthermore, economic conditions in municipalities with stricter monitoring improve, indicating that environmental enforcement and economic development need not be at odds.
Erik Merkus (Tue,) studied this question.