Yacov Tsur (Hebrew University of Jerusalem) and Aliza Fleischer (Hebrew University of Jerusalem) have posted Democracy’s Hidden Dividend: The Unpriced Value of Non-Provisioning Forest Ecosystem Services on SSRN. Here is the abstract:
We apply Mundlak’s Correlated Random Effects (CRE) framework to recent global data to estimate the impact of democratization on Non-Provisioning Forest Ecosystem Services (NPFES). Because these services—such as carbon sequestration, biodiversity conservation, and hydrological regulation—are global public goods typically excluded from standard national accounts, their democracy-induced supply constitutes a hidden economic dividend. We find that a permanent transition to full democracy in a median tropical country generates a long-run NPFES dividend equivalent to 30.31% of its GDP, while a one-standard-deviation increase yields a 3.69% dividend. However, realizing these global benefits requires forest-rich nations to halt deforestation, forcing them to sacrifice short- and medium-term domestic economic gains. This trade-off disproportionately burdens developing nations, highlighting the need for international compensation. Our NPFES valuations provide an essential empirical component for designing such compensation mechanisms by explicitly estimating the global future return on investment in financing localized forest conservation.
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