they are in turn determined by a number of underlying factors. Note that the same underlying factors commonly impact both the agricultural and forest rent, making the net effect the critical issue. This is not pursued further here, but we return to the issue in section 3.2.

# **_Shifts in agricultural rent_**

A number of factors will tend to increase the agricultural land rent and thereby push the agricultural frontier outwards. These are summarized in Table 1 and elaborated below.<sup>8</sup>

- (a) Higher output prices: This can be caused by an increased demand for the output (due to, for example, higher income, changes in preferences, opening-up for international trade, or devaluation), increased competition and market efficiency, or lower taxes.

- (b) Good agroecological conditions: Land suitable for agriculture (good soils, enough rainfall, etc.) is expected to lead to more deforestation.

- (c) Technological progress: The impact of technological progress (higher productivity) is a complex issue, and discussed in section 2.3. The impact on land rent of the sector enjoying technological progress, without considering any market feedbacks and interaction among sectors, is nevertheless to increase the land rent unambiguously.

- (d) Lower off-farm wages: Poorer off-farm employment opportunities, reducing the opportunity cost of using labor in extensive agriculture, can be due to, for example, economic stagnation and low economic growth.

- (e) Lower interest rates: Access to cheap credit provides an incentive for agricultural expansion, but the strength depends on how capital intensive extensive agriculture is. While low labor cost may be associated with economic stagnation, it may be the opposite for credit cost (capital).

- (f) Lower input prices: In the basic agricultural land rent equation, lower input prices provide a stimulus for deforestation. There are, however, important interactions between intensive and extensive agriculture that may reverse this conclusion, as discussed in section 2.2.

- (g) Better roads and transport infrastructure: Reduced transport costs (alternatively expressed as higher output prices) provide a strong push for expansion of agriculture.

- (h) Lower costs of property rights enforcement: This can be interpreted as higher tenure security, and should lead to agricultural expansion. But again, the issue is more complex than is suggested here and is discussed in greater depth in section 2.4.

|**Parameter**|**Determinants**|
|---|---|
|_p_|Market demand, taxes/subsidies, export/import regulations, marketing efficiency<br>(competition)|
|_w_|Off-farm employment opportunities, migration, economic development|
|_q_|Access to credit, interest rates|
|_y_|Technology, intensification, agroecological conditions: soil quality, rainfall, temperature|
|_l, k_|Technologies applied (labor or capital intensive:_l_or_k_high)|
|_c_|Property regime, law enforcement/corruption, land competition|
|_v_|Roads (extent and quality), rivers, general infrastructure|

**Table 1. Determinants of the decision parameters in the agricultural land rent equations.**

> 8 Much of this discussion is based on Angelsen and Kaimowitz (1999),.

9