Moral Hazard, Social Well-Being and Tropical Deforestation
The aim of this paper is to explore the impact of tropical deforestation due to logging activities on social well-being when there is moral hazard in the logging industry. I set up a multiperiod principal-agent model. I show that when the government cannot observe the deforestation rate realized by the logging firm, an increase in tropical deforestation decreases social well-being.
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