Francisco Costa

Assistant Professor of Economics at the University of Delaware

Invited Researcher at J-PAL (LAC & K-CAI)

Affiliated Researcher at FGV EPGE

Working Papers

Efficient Forestation in the Brazilian Amazon: Evidence from a Dynamic Model, with Rafael Araujo and Marcelo Sant'Anna. [Coverage: VoxDev]

This paper estimates the Brazilian Amazon’s carbon-efficient forestation -- i.e. when farmers internalize the social cost of carbon. We propose a dynamic discrete choice model of land use and estimate it using a panel of land use and carbon stock of 5.7 billion pixels between 2008 and 2017. Business-as-usual implies an inefficient release of 44 gigatons of CO2 in the long run resulting from deforestation of an area twice the size of France. We find that relatively small carbon taxes can mitigate a substantial part of inefficient deforestation. We show that targeted mitigation efforts in areas with the largest potential for emission reductions can be very effective. We also find that while taxing cattle production can abate emissions, taxing crops is virtually innocuous.

The Brazilian Amazon’s Double Reversal of Fortune, with Robin Burgess and Benjamin Olken.

We use high-resolution satellite data to determine how Amazonian deforestation changes discretely at the Brazilian international border. We document two dramatic reversals. In 2000, Brazilian pixels were 37 percent more likely to be deforested, and between 2001 and 2005 annual Brazilian deforestation was more than three times the rate observed across the border. In 2006, just after Brazil introduced policies to reduce deforestation, these differences disappear. However, from 2014, amid a period of economic crisis and deteriorating commitment to environmental regulation, Brazilian deforestation rates jump back up to near pre-reform levels. These results demonstrate the power of the state to affect whether wilderness ecosystems are conserved or exploited.

The Impact of Climate Change on Risk and Return in Indian Agriculture, with Fabien Forge, Jason Garred, and Joao Paulo Pessoa. R&R at Environmental and Resource Economics.

We investigate the extent to which climate change will result in insurable and uninsurable losses for farmers in India. Shifts in the distributions of temperature and precipitation may increase the volatility of farmers' yields, leading to rising but insurable risk, and/or reduce mean yields and thus cause permanent reductions in the returns to farming. We use a multi-run climate model to predict the future distribution of yields at the district level for sixteen major crops. For the average district, we project a sharp decline in mean agricultural revenue, but relatively small shifts in volatility. This is because weather draws resulting in extremely low agricultural revenue -- what had once been 1-in-100-year events -- are predicted to become the norm by the end of the century, implying substantial uninsurable losses from the changing climate.

Too hot to learn? Evidence from grade progression and school dropouts, with Diana Goldemberg. R&R at Economic Inquiry.

This paper studies the impact of cumulative heat exposure on educational outcomes of children from 6 to 18 years old. We use data from over 78 thousand schools and 114 million enrollments in the hottest and poorest regions of Brazil between 2007 and 2016. We exploit weather variations across school-grade-year in all 1,794 Northeast municipalities. We find that extreme heat on school days reduces grade progression and increases school dropouts of high school students. These effects are driven by students in public schools in urban areas. We find no statistically significant effect of heat on the grade progression of younger students.

Advanced Work-in-Progress

Public Attention Reduced Forest Fires in the Brazilian Amazon, with Rafael Araujo and Teevrat Garg.

International frameworks and agreements to reduce anthropogenic environmental disasters rely on international pressure driving local action. Although environmental catastrophes can occasionally capture international attention, it is unclear if focused media and increased public outcry can reduce environmental damage. We study the unusual and concentrated increase in international scrutiny on forest fires in the Brazilian Amazon in August 2019. Comparing active fires in the Brazilian Amazon versus those in the Peruvian and Bolivian Amazon before and after a surge in public attention on the Brazilian Amazon, we find that increased public attention reduced fires by 22% (93,607 avoided pixel-days of active fire) avoiding 24.81 million MtCO2 in emissions. Our results highlight the power of public pressure to compel governments to act on pressing environmental issues, even in political contexts hostile to environmental priorities.

Untangling Trade and Technology: Evidence from Deforestation in Brazil, with Igor Carreira and Joao Paulo Pessoa.

This paper quantifies the relative footprint of trade and agriculture technology on land use in Brazil between 1996 and 2017. Municipalities exposed to greater demand from China experienced an increase in pastureland compensated by a reduction in cropland, with no statistically significant change in forest cover. Municipalities with greater suitability to new genetically engineered soybean seeds experience a loss of forest cover and a large increase in cropland area. We find that the technology-driven expansion of cropland happened, initially, through deforestation and, later, through the conversion of pastureland. Our results indicate that agriculture technology, and not trade, was the main driver of deforestation and land-use changes in the Brazilian agriculture sector.

The Environmental Costs of Political Interference: Evidence from Hydropower Plants in the Amazon, with Juliano Assunção and Dimitri Szerman.

We estimate the impacts of ten recently built hydroelectric power plants in the Brazilian Amazon on forest loss. We find that the construction of the ten plants accounts for 21 percent of the observed forest loss in areas within 50 kilometers of the construction sites. However, all of this effect comes from only four plants. We interpret these results are evidence that existing regulations were effective in limiting environmental damages in six cases. We suggest that the dam's local economic impacts and political interference in the licensing processes explain the heterogeneous effects.

Technology Adoption and Structural Transformation: Evidence from the Industrialization of the Sugarcane Sector, with Francisco Luis Lima.

This paper shows how the adoption of agricultural mechanization can prompt structural transformation in a middle-income economy. We study the fast spread of mechanical harvesting that followed the prohibition of pre-harvest field burning in the sugarcane sector in São Paulo state, Brazil. We combine remote-sensing data on sugarcane production and census data to estimate the impacts of field mechanization on the local labor markets. We find that the adoption of mechanical harvesting led to the industrialization of the field; one standard deviation larger adoption of agricultural mechanization reduces the share of workers employed in the agricultural sector by 2.3 percentage points, and increases the employment share of the manufacturing and services sectors by 1.7 and 1.1 percentage points, respectively.

(May, 2022)