The microdynamics of conservation and development in tropical forests

Throughout the developing world---wherever the rural poor rely on fragile natural resources for their livelihood---development groups strive to find better ways of alleviating poverty while promoting environmental conservation. Central to such efforts is the pressing need to understand the microeconomic logic of livelihood choices and asset accumulation among the rural poor. Three essays of this dissertation explore the microdynamics of conservation and development in tropical forests by investigating the dynamic linkage between natural resource use and asset accumulation among forest people.;The first essay develops a dynamic portfolio model using a control framework with two state variables to jointly examine deforestation and land degradation. This integration incorporates the impact of forest clearing on soil stock, capturing the tight link between the two assets, land and soil. We explore the prospect for sustainable development as a portfolio shift of farmers from land quantity to land quality. It is shown that even if policy outcomes are unambiguous when the two assets are considered separately as in previous work, policy outcomes can become ambiguous under insecure tenure---as is the case in most tropical forest areas---once the two assets are considered together.;The second essay develops a similar dynamic portfolio model to combine deforestation with the accumulation of different non-land assets. We explore the prospect for a sustainable portfolio shift of farmers from land to non-land assets which earn non-agricultural income. Ambiguous policy outcomes under insecure tenure revealed in the first essay are shown to hold for non-land assets that are tightly linked with forest clearing.;The third essay explores the persistence of asset inequality under imperfect markets by investigating multiple asset accumulation and activity choice among Amazonian peasant households. Asset portfolios and sectoral incomes are estimated to investigate: whether asset accumulation is endowment and lifecycle dependent (do initial holdings and time in lifecycle strongly shape current holdings?); and whether activity choice is asset dependent (do the poor and rich have distinctive shadow prices on their assets?). It is shown that the presence and extent of these dependencies depend on asset-activity types and environmental conditions.