Effects of forestry decentralization on rural inequality in Nepal

Decentralized approaches to natural resource governance can promote conservation while reducing poverty in the Global South. However, the local benefits under decentralized governance are often unequal, reflecting extant social inequalities. There is a lack of rigorous evidence from national-scale studies showing how decentralization programmes affect inequality compared with what is observed in decentralization’s absence, and extant theory leads to competing hypotheses about such effects. We use data from a large-scale forestry-sector decentralization programme in Nepal during 2001–2011 to test general theories regarding the effects of such initiatives on inequality. We analyse census micro-data from two nationwide censuses, which we merge with administrative data on the implementation of decentralization and analyse through a two-way fixed-effects estimation approach. We find evidence suggesting that Nepal’s programme delivers significant poverty-alleviating benefits to the dominant ethnic and caste groups and comparatively smaller benefits to members of marginalized minority groups, resulting in apparent local increases in rural inequality associated with the programme. Thus, even relatively progressive programmes, such as Nepal’s, may lead to potential trade-offs between poverty alleviation, environmental conservation and inequality outcomes. Improved compliance with equity provisions may help to equalize effects, as could more substantial targeted benefits. Decentralized natural resource governance is thought to aid conservation and reduce poverty, but its heterogeneous local effects are under-explored. A study in Nepal shows that forest governance decentralization reduces poverty but the benefits are greater for dominant ethnic and caste groups compared with minority ones.