Export crop price stabilization, land use change, and forest loss: evidence from Ghana

Abstract

This paper documents the relationship between staple crop price variability, export crop cultivation, and forest loss. Specifically, I test whether maize price variability affects households' cultivated farmland acreage. I use nationally-representative household panel data from Ghana to show that an increase in staple crop price variability in the previous year increases household's total cultivated acreage. The increase in cropped area is largely due to an increase in household's cultivated acreage of cocoa – an export crop with a guaranteed price fixed annually by the Ghanaian government. I construct district-level panel data on annual forest loss and maize price variability from 2007 to 2018 across Ghana’s forest belt to study the effect of such expansion on forest loss. I find that increases in staple crop price variability lead to forest loss in Ghana through the channel of the increased cultivation of cocoa. The study highlights an important linkage between agricultural price stabilization policies and environmental externalities.