Land Values in Frontier Settlements of the Brazilian Amazon

Even in the absence of formal land markets, estimated values on agricultural frontiers of the Brazilian Amazon reflect the value-adding characteristics of the land. Understanding these characteristics provides important insights to the incentives (or dis-incentives) to protect tropical forests and reduce deforestation. A hedonic model is used to identify characteristics determining smallholder land values on the Amazon frontier. Years on the lot, area under agricultural production, and house values were found to add value; while distance from the nearest city and area under forest decreased values. Characteristics that do not appear to significantly affect land value include pasture area and the claim to hold definitive title. By not adding significantly to land values, pasture may be used to establish property rights rather than to increase land value through positive rents. Our results also confirm the underutilization of the forest resource by smallholders. (C) 2008 Elsevier Ltd. All rights reserved.