Debt-for-nature swaps as noncooperative outcomes

Recently, nongovernmental organizations have engaged in debt-for-nature swaps in an effort to slow the rate of deforestation. The purpose of this paper is to provide analysis of the welfare properties that arise to self-enforcing swaps. We show that swaps may be self-enforcing in that they can arise...

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Bibliographic Details
Published in:Ecological economics 1996-11, Vol.19 (2), p.135-146
Main Authors: Chambers, Paul E., Jensen, Richard, Whitehead, John C.
Format: Article
Language:English
Subjects:
Conservation
Debt
Debt-for-nature swaps
Deforestation
Environmental degradation
Environmental policy
Forest fragmentation
Game theory
Non-governmental organizations
South America
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Summary:Recently, nongovernmental organizations have engaged in debt-for-nature swaps in an effort to slow the rate of deforestation. The purpose of this paper is to provide analysis of the welfare properties that arise to self-enforcing swaps. We show that swaps may be self-enforcing in that they can arise as noncooperative equilibria at high harvest and debt levels. Under these conditions, a credit constrained LDC is likely to reduce harvest levels. Similarly if the NGO views preservation projects as complements, it is likely to provide debt relief. We provide simulations to demonstrate the effects of different parametric values for the utility functions of the LDC and NGO on the noncooperative and cooperative equilibria.
ISSN:0921-8009
1873-6106
DOI:10.1016/0921-8009(96)00032-8