Agricultural Displacement and Deforestation Leakage in the Brazilian Legal Amazon

Does environmental policy aiming to reduce deforestation induce displacement of existing agricultural activities? To shed light on this question, we exploit a difference-in-differences strategy with a distance-based treatment to examine whether two policies in the Brazilian Amazon, the Soy Moratorium and the Zero-Deforestation Cattle Agreements, have displaced production or deforestation into neighboring regions. Our results show evidence that the Soy Moratorium induced soy spillovers onto previously cleared land—mainly pasture—in the less regulated ecosystem. The spillovers from the Cattle Agreements, three years after the Soy Moratorium, resulted in increased deforestation.