Transaction costs and community-based natural resource management in Nepal

• Published in: Journal of environmental management 2006, Vol.78 (1), p.5-15
• Main Authors: Adhikari, Bhim, Lovett, Jon C.
• Format: Article
• Language: English
• Subjects: Animal, plant and microbial ecology; Applied ecology; Biological and medical sciences; citizen participation; Collective action; Common pool resources; Community; community development; Community forestry; Community Participation; Conservation of Natural Resources - economics; Conservation, protection and management of environment and wildlife; cost analysis; Costs and Cost Analysis; Environmental management; Equity; Forest management; Fundamental and applied biological sciences. Psychology; General aspects; household income; household surveys; Households; natural resource economics; natural resource management; Natural resources; Nepal; Poor; Property rights; Resource management; Socioeconomic factors; socioeconomic status; Sustainable development; Transaction costs; Trees; villages
• ISSN: 0301-4797; 1095-8630
• DOI: 10.1016/j.jenvman.2005.04.005

Transaction costs in community-based resource management are incurred by households attempting to enforce property right rules over commons resources similar to those inherent in private property rights. Despite their importance, transaction costs of community-based management of common pool resources (CPRs) are often not incorporated into the economic analysis of participatory resource management. This paper examines the transaction costs incurred by forest users in community forestry (CF) based on a survey of 309 households belonging to eight different forest user groups (FUGs) in the mid hills of Nepal. The analysis reveals that the average ‘poor’ household incurred Nepalese rupees (NRS) 1265 in transaction costs annually, while wealthier ‘rich’ households incurred an average of NRS 2312 per year. Although richer households bear higher proportions of such costs, transaction costs for CF management as a percentage of resource appropriation costs are higher for poorer households (26%) than those of middle-wealth (24%) or rich households (14%). There are also village differences in the level of transaction costs. The results show that transaction costs are a major component of resource management costs and vary according to socio-economic status of resource users and characteristics of the community.