Government revenue composition and forest loss: A cross‐national study of low‐ and middle‐income nations

Abstract

Abstract Introduction We draw on social contract theory and resource curse literatures to assess the relationship between government revenue composition and forest loss in low‐ and middle‐income nations that collect higher levels of revenues from a broad base of individuals and companies should have less forest loss. Methods We use two‐stage instrumental variable regression models to test how a government's revenue source impacts forest loss for a sample of 83 low‐ and middle‐income nations. Results We find support that low‐ and middle‐income nations that collect more revenue from broad‐based taxes tend to have less forest loss. Conclusion We move the cross‐national research frontier forward by applying insights from the fiscal contract and resource curse literatures to forest loss. We find that a government's revenue source is related to forest loss with low‐ and middle‐income nations that rely more on broad‐based taxes having lower levels of forest loss than revenues collected from other sources including natural resource rents and foreign aid.