Institutions under Pressure: The Effect of Community Groups on Forest Preservation after a Natural Disaster

Abstract We analyse the resilience of community-based institutions to large shocks. Our case study is on forest user groups in Nepal in the aftermath of the 2015 earthquake. We combine remote sensing data with detailed administrative data on forest user groups and exploit spatial variation in the intensity of the earthquake. Using a triple difference strategy, we show that the earthquake-induced increase in deforestation is significantly lower in locations with a higher share of forest covered by forest user groups. Thus, these institutions lead to more sustainable use of forests when they are under pressure. Regarding potential mechanisms, survey data suggest that social capital plays a role for the positive effects of forest user groups. More generally, our findings show that shifting governance of local resources to community-based institutions can be an effective policy in times of increased pressure on natural resources.