Losing Territory: The Effect of Administrative Splits on Land Use in the Tropics

Abstract

State decentralization is often promoted as a way to improve public service delivery. However, its effects on forests are ambiguous. Decentralization might not only improve local forest governance, but also change the incentives to promote agricultural expansion into forests. This study focuses on the power devolution stemming from the proliferation of new administrative units in Indonesia during the last two decades. The discontinuous changes in government responsibilities at new administrative borders provide exogenous spatial variation to study forest outcomes. Using a spatial boundary discontinuity design with 14,000 Indonesian villages, we analyze the effects of 115 district splits between 2002 and 2014. Results show a 35% deforestation decline within new (child) districts relative to the existing (mother) districts both immediately before and after the splitting. In pre-split years, these changes can be explained by agricultural divestment by the mother districts on territories that are soon to be lost. In post-split years, the short-term forest conservation benefits are neither rooted in an increased social cohesion nor stronger development. Instead, newly formed districts seem to be temporarily suffering from administrative incapacity to attract large-scale agricultural investments. In the long run, no lasting local forest conservation benefits persist as deforestation equalizes between child and mother districts a few years later.

Keywords: Deforestation, Decentralization, Spatial RDD, Indonesia, Environmental protection

JEL Classification: 013, Q15, Q56, H77