This thesis explores the problem of forest cover loss in Laos, a money-poor, sparsely populated country with a large forest stock and high log demand from its richer neighbours. Lao government policy places a high level of importance on environmental management. Despite this, deforestation is a serious problem in Laos, mainly because logging activity is dominated by illegal harvesting which exceeds the legal quotas by as much as six times.
The economic literature on tropical deforestation demonstrates a general lack of knowledge about Laos. This literature is also concentrated towards the behaviour of small-scale farming households, which in Laos plays a role second to market-driven deforestation. Therefore, the current literature does not adequately analyse the issue of deforestation in the case of Laos. In order to bridge this gap and contribute to knowledge, this thesis sidesteps the problem of data acquisition in Laos by using stylised dynamic models of market-driven deforestation. These models conjecture how certain parameters directly impact on deforestation. Analytical solutions from the models are difficult to derive. Therefore, the development of a new genetic algorithm approach is also a central contribution of the thesis. Implemented on an SGi Origin 2000 supercomputer, this powerful algorithm is capable of efficiently approximating complex open-loop dynamic games played over infinite time horizons. Numerical simulations of the model indicate:
1. Some illegal logging may be socially optimal in Laos;
2. Increases in the price of timber motivate further enforcement of government property rights, but still lead to increased forest cover loss through illegal logging; and
3. Corruption increases deforestation pressure and represents a net loss to the Lao economy.
One major implication of the thesis' findings is that Lao forestry policy should aim to capture more rent from forests by incorporating social costs into timber values and then protecting forest property rights accordingly. Policies central to this implication include the need to further develop human resources and legal structures, both of which are presently inadequate in Laos.