Government revenue composition and forest loss: A cross-national study of low- and middle-income nations

Introduction: We draw on social contract theory and resource curse literatures to assess the relationship between government revenue composition and forest loss in low- and middle-income nations that collect higher levels of revenues from a broad base of individuals and companies should have less forest loss. Methods: We use two-stage instrumental variable regression models to test how a government's revenue source impacts forest loss for a sample of 83 low- and middle-income nations. Results: We find support that low- and middle-income nations that collect more revenue from broad-based taxes tend to have less forest loss. Conclusion: We move the cross-national research frontier forward by applying insights from the fiscal contract and resource curse literatures to forest loss. We find that a government's revenue source is related to forest loss with low- and middle-income nations that rely more on broad-based taxes having lower levels of forest loss than revenues collected from other sources including natural resource rents and foreign aid.