California Sea Grant College Program

This dissertation uses a dynamic household utility optimization model to examine small-scale settler behavior in colonization projects within the Brazilian Amazon's arc of deforestation. The aim is to illuminate factors influencing the typical trajectory from forest to pasture—a process with implications for settler welfare and the environment. Model dynamics derive from herd growth and degradation, in a frontier-like context of constrained access to capital and labor markets.

Using numerical simulations, the analysis shows competition for the household's scarce factor labor among pasture investment, annual cropping, and off-farm wage work playing out in different trajectories for household time allocation and land use with different model parameters. The investment approach bridges two often opposing views of the small-scale farmer—struggling for subsistence, or rising out of poverty—placing them as potential snapshots along a trajectory.

In the long run, the household devotes all its labor to the activity with the higher return to that labor—maintaining a fixed amount of pasture and living off sales from herd growth, or working off farm. Herd growth and the discount rate determine optimal pasture stocking rates. The household's trajectory shifts with additional activities in ways dependent on their returns-to-labor profiles and parameter levels. Dynamic patterns change under decreasing marginal returns to labor over time (with annuals), constant returns (with wage work), and rising returns (pasture investment). Because the shadow wage changes over time, participation in a labor market can become attractive due to pasture investment.

Simulations highlight dynamic trade-offs, and include scenarios with a prolonged annuals phase, and volatile behavior such as a one-year spike in pasture labor, or overshooting the long-run herd stocking rate. In an attempt to examine frontier labor market integration, the dissertation also includes simulations with a changing exogenous wage and labor trading between two households. Expectation of off-farm work in the future encourages annuals and slows pasture growth prior to the wage phase, but speeds the pasture transition thereafter. Trading labor between farms with different household sizes favors annuals along the trajectory, but does not affect the steady state. Labor trades between farms with different time preferences favors pasture.