The Economic and Ecological Impact of Soy Expansion in Brazil: A Synthetic Control Method Approach

The impact of soy expansion in Brazil, one of the largest food producers in the world, has been widely explored in the literature. Scholars have looked at how soy cultivation in Brazil impacts deforestation, employment, economic growth, and income distribution among other aggregates. However, there is no clear consensus about soy’s socioeconomic benefits and drawbacks: this is also because previous studies have looked at Brazil at the aggregate level, or at circumscribed case studies, without considering the intrinsic complexity and heterogeneity of a Federal Republic consisting of 26 states and one federal district. This research builds on the existing stream of literature, and it applies a Synthetic Control Method (SCM) for investigating the impact of soy expansion on GDP, CO2 emissions, and deforestation at state level in Brazil. Our results show that states which went through an increase in soy cultivation experienced a positive impact on their GDP (although this dynamic cannot be generalised) and a negative impact in terms of deforestation. However, the impact on CO2 emissions is less evident. Moreover, these results are heterogeneous across states and over time, suggesting that the relationship between soy expansion and socio-ecological outcomes is rather complex.