The United States Agency for International Development and forest loss: A cross-national analysis of environmental aid

Among scholars of international development, there is a debate regarding the effectiveness of bilateral aid to improve the natural environment. Here we focus on evaluating whether United States Agency for International Development's (USAID) aid in the environmental sector reduces forest loss. Little empirical evidence exists on this question, partly because of the challenge of modeling such a relationship, given the problem of endogeneity whereby the same social, political, or economic processes that affect forest loss may also be correlated with a nation receiving aid from international donors. We contribute to this debate by utilizing a two-stage instrumental variable regression model to analyze cross-national data for a sample of 74 low and middle income nations. After controlling for potential endogeneity, we find that higher levels of USAID's aid for environmental protection correspond with lower rates of forest loss. We also find that a forest's proximity to infrastructure, agricultural and forestry exports, agricultural land area, and tropical climate are related to increased forest loss.