Francisco Costa

Assistant Professor of Economics at University of Delaware and FGV EPGE.

Research interests: Environmental Economics, and Development Economics.

Working Papers

Environmental Economics

Efficient Forestation in the Brazilian Amazon: Evidence from a Dynamic Model, with Rafael Araujo and Marcelo Sant'Anna. *NEW*

This paper estimates the Brazilian Amazon’s efficient forestation level. We propose a dynamic discrete choice model of land use and estimate it using a remote sensing panel with land use and stock of carbon of 5.7 billion pixels, at 30 meters resolution, between 2008 and 2017. We estimate that a business as usual scenario will generate an inefficient loss of 1,075,000 km2 of forest cover in the long run, an area almost two times the size of France, implying the release of 44 billion tons of CO2. We quantify the potential of carbon and cattle production taxes to mitigate inefficient deforestation. We find that relatively small carbon taxes can mitigate a substantial part of the inefficient forest loss and emissions, while only very large taxes on cattle production would achieve a similar effect.

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. Submitted.

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 study analyzes 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 hotter school days during the academic year reduces grade progression, with extreme heat being particularly detrimental. A one-degree Celsius increase in daily maximum temperatures reduces grade progression rates by 0.43 percent, and increases dropout rates by 3.86 percent. Results are consistent with established links between temperature and cognitive performance and have implications for evaluating the welfare-burden of climate change in developing countries.

Public Attention Reduced Forest Fires in Brazil, with Rafael Araujo and Teevrat Garg. Submitted.

Development Economics

How to Attract Physicians to Underserved Areas? Policy Recommendations from a Structural Model, with Leticia Nunes and Fabio Sanches. [Coverage: Estadão, Valor] 2nd R&R at Review of Economics and Statistics.

This paper exploits location choices of all generalist physicians graduated in Brazil between 2001 and 2013 to study policies aiming at increasing the supply of physicians in underserved areas. We set up and estimate a supply and demand model for physicians. We estimate physicians' locational preferences using a random coefficients discrete choice model. The demand has private establishments competing for physicians with private and public facilities around the country. Policy counterfactuals indicate that quotas in medical schools for students born in underserved areas and the opening of vacancies in medical schools in deprived areas are more cost-effective than financial incentives.

Stop Suffering! Economic Downturns and Pentecostal Upsurge, with Angelo Marcantonio and Rudi Rocha. [Coverage: Folha, Café da Manhã] R&R at Journal of the European Economic Association.

This paper estimates the effects of economic downturns on the expansion of Pentecostal Evangelicalism in Brazil. We find that regions more exposed to economic distress experienced a persistent rise both in Pentecostal affiliation and in the vote share of candidates connected to Pentecostal churches in national legislative elections. Once elected, these politicians carried out an agenda with greater emphasis on issues that are sensitive to fundamental religious principles. These results uncover a direct link between economic distress and a sustained entrenchment of more fundamentalist religious groups in a contemporary democracy.

Local Economic Impacts of Brazilian Hydroelectric Power Plants, with Juliano Assunção and Dimitri Szerman.

This paper estimates the short- and medium-run effects of the construction of large hydroelectric power plants (HPPs) on the economic development of Brazilian municipalities. We use the synthetic control method to perform one case study for each of the 82 municipalities affected by an HPP between 2002 and 2011. Three main findings emerge. First, the median impact of the construction of HPPs on the local economy follows an inverted U-shape over a five-year horizon (the average construction time is four years). Second, the median impact of the construction in the medium-run is positive but modest, with no effect on the composition of local economic activity. Third, the estimated effects display a lot of dispersion. These results do not provide support for the view that large construction works unequivocally spur local development.

Advanced Work-in-Progress

Environmental Regulation and Political Interference: Evidence from Power Plants in the Amazon, with Juliano Assunção and Dimitri Szerman.

This paper estimates the impacts of the construction of the new hydroelectric power plants (HPPs) built in the Brazilian Amazon between 2003 and 2011 on local deforestation patterns. We assemble a geo-referenced panel dataset combining high-resolution deforestation data with the comprehensive list with the locations of all HPPs’ feasibility studies in the region. We use the synthetic control method to identify the causal impact of the actual construction of each HPP on forest cover on different perimeters around the construction site. We find that the construction process increases deforestation within 15 kilometers from the HPP. Despite stimulating local deforestation, some plants have indirect positive local effects by avoiding deforestation on areas ranging between 15 and 50 kilometers from the HPPs. Overall, the construction of the 11 plants in the Amazon was responsible for 7% of the observed deforestation in areas within 50 kilometers from the construction site.

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 an emerging 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 censuses 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 manufacturing and services sector by 1.7 and 1.1 percentage points, respectively.

(December, 2020)

"Estes artigos expressam a opinião do autor, não representando necessariamente a opinião institucional da FGV."