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This paper examines the impact of changes in agricultural land use on deforestation at the local level in the Tapajós basin in the Brazilian Amazon. We use exogenous variation in crop to beef relative prices to investigate the effects of pasture to crop conversion on deforestation. Our findings indicate that increases in crop to beef relative prices increase the rate of pasture to crop conversion. The results also indicate that these increases reduce the rate of deforestation. The magnitude of our estimates implies that land conversion reduced deforestation at the local level in 5,300 square kilometers from 2002 to 2012. This represents almost 15% of the deforestation observed in the region during this period. We propose a simple economic model which ties these results to different input-intensities in cattle ranching and crop cultivation.

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