THE MUTUAL RELATIONSHIP BETWEEN REGIONAL INCOME AND DEFORESTATION: A STUDY ON TURKEY

Abstract

ABSTRACT

This paper addresses the bilateral relationship between growth and environment. It aims to show how regional economic growth causes environmental deterioration (deforestation), while at the same time the environmental resources function in turn as a supply factor for economic development. A simultaneous-equations model must develop and apply to test this two-way relationship statistically. In the empirical application economic growth is measured by regional income and environmental deterioration by deforestation. We use data from 26 NUTS 2 regions in Turkey between the years 2004 and 2011. The results of the two-stage least squares (2SLS) regression analysis reveal strong evidence on the presence of a mutual relationship between deforestation and regional income, while lagged deforestation is a statistically significant positive determinant of income growth, and vice versa.