Deforestation and Smallholder Income: Evidence from Remittances to Nepal

Abstract

This article examines the effect of remittance income on deforestation in Nepal during 2001–2010 using satellite-based land use data and a nationwide household survey. Results indicate that remittance income reduced deforestation by 4.2 percentage points, accounting for almost 12% of deforestation during this time. An additional 1,000 Nepalese rupee increase in average household annual remittance income reduced the ward-level deforestation by an approximate 0.435 percentage point. There is no evidence that remittances induced expansion of agricultural land or stimulated demand for forest products. Instead, remittances contributed to the shift of households’ demand for timber and fuelwood toward nonwood alternatives for housing construction and cooking.