Revisiting the Dynamics of Forest Area Change: A Panel Data Assessment

Abstract

This study employs a panel dataset on forest area of 22 countries and for the time period 1995–2016 in order to provide an up-todate assessment on determinants of forest area change. Our set of explanatory variables is drawn from the Environmental Kuznets curve hypothesis and well-established factors affecting forest area change. In this respect, macroeconomic stability, socioeconomic development, institutional efficiency and quality of governance are taken into account to assess the cumulative nature of changes in forest cover. Using static and dynamic specifications our analysis produce different results with an inverted U-shape curve only in the static case and an inverted N-shape relationship in the dynamic specifications. Specifically, using an appropriate fixed effects model validates the EKC hypothesis finding an inverted U-shaped curve with high within-the-sample turning points. The random coefficients method applied does not support the EKC hypothesis in all possible specifications while the orthogonal deviations GMM estimates indicate the presence of an inverted U-shape relationship in all cases with lower cases within-the-sample turning points. A slow adjustment rate is found in all dynamic specifications indicating the need of around four time periods for a country to adjust to the LR equilibrium level of forest recovery.