Optimal protected area implementation under spillover effects

Abstract

This paper determines the best political implementation level of protected areas in the presence of two spillover effects, the infrastructure and scarcity effects. We show that decentralized regulation always leads to an overall decrease in deforestation under the infrastructure effect but not under the scarcity effect. Centralized regulation always leads to a larger protected area than decentralized regulation under the scarcity effect, which is not always true under the infrastructure effect. Finally, we conduct a case study of the Brazilian Legal Amazônia and find that spillover effects matter in the size of protected area design.