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Abstract

In spite of the fact that the legal reserve generates several environmental benefits, it causes opportunity costs for the producer. This paper uses the Zou, Ang and Poh (2006)’s model to estimate the opportunity cost of holding the legal reserve inside each farm in São Paulo and Mato Grosso States (Brazil) in 1995 and 2006 (which correspond to the last two agricultural census). The methodology takes the average producer by municipality and adjusts the number of municipalities according to Paiva (2007 and 2008)’s method. Among the results, the following are highlighted: (1st) both technical efficiency and environmental technical efficiency are small in both analyzed states, but they have grown up between the two analyzed years; (2nd) the opportunity cost of legal reserve is lower in São Paulo compared to that in Mato Grosso (R$ 23,878 and R$ 48,353 per farm, respectively, in 2006), but the cost per hectare is 2.22 times higher in São Paulo in relation to Mato Grosso; (3rd) after displaying these costs on maps, some similarities and dissimilarities appeared among neighboring cities, which would be explored in the future by using spatial econometric techniques. New research might also be conducted about this paper’s issue as new dataset becomes available.

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