Forest policies and many governments

Abstract

In this article, I examine pressures on the forest stock when multiple governments, which control different policies, have distinct revenue needs and respond to different constituencies. I assume one type of government controls public forest harvesting, while other governments (typically local or lower ones) control taxes on productive firms in their constituency. Preservation of public forests provides nontimber benefits, or public goods, for consumers at both local and national levels, and these public goods values may vary across constituencies. I investigate how public goods depend on types of government coordination including revenue sharing, shared constituencies, transfers between governments, and federalism (i.e., where one government responds only to its own revenue needs and constituencies without regarding the impact on other governments' revenues or constituents). The results suggest there are several forms of government coordination that either enhance or reduce fiscal constraints imposed on governments, and these spill over onto the forest stock through policy-induced changes in harvesting. In contrast to previous work, in the forestry case reduced government coordination and fiscal federalism can actually protect forest resources and increase public goods produced from preserving forests. If governments perceive increased revenues from public harvesting, then forest exploitation is reduced by shifting fiscal responsibilities away from governments that own resources. It is also shown that pure transfers may not reduce pressures on forest stocks unless certain restrictive conditions are met, and revenue sharing can provide incentives to increase public harvesting and reduce public goods in order to support revenue collections of all governments.