Decentralized approaches to natural resource governance are widely promoted in the Global South for their potential to improve conservation outcomes while alleviating rural poverty. However, the distribution of benefits under such programs is often unequal, reflecting existing social hierarchies. In Nepal, a large-scale forestry-sector decentralization program implemented between 2001 and 2011 provides a case study to examine these dynamics. Using census micro-data from 2001 and 2011, merged with administrative records on program implementation, researchers applied a two-way fixed-effects approach to analyze how decentralization affected rural inequality, particularly across ethnic and caste groups.
The program, often regarded as a model of decentralization, involved establishing Community Forest User Groups (CFUGs) in rural villages, granting communities collective rights to manage local forests. Households gained subsistence benefits such as firewood, fodder, and timber, as well as cash benefits, micro-loans, or employment opportunities. Participation varied widely across households, and governance of CFUGs included local representation with mandated inclusion of marginalized groups. Despite these progressive features, pre-existing social hierarchies influenced participation and benefit distribution, often favoring historically advantaged groups like Brahmin, Chhetri, and Newar households over marginalized Dalit, Janajati, and minority groups.
The study tested two competing hypotheses: that decentralization either reduces inequality by providing formal rules and equity-focused provisions to benefit marginalized groups or worsens inequality by enabling dominant groups to capture disproportionate benefits. Using a multi-dimensional poverty index encompassing health, education, and living standards, the analysis measured changes in household welfare across ethnic and caste groups. Results showed that the program reduced poverty more substantially among historically advantaged households, while benefits to marginalized groups were weaker or statistically insignificant. This pattern led to small but measurable increases in local inequality, primarily because advantaged groups experienced larger poverty reductions.
Mechanisms driving these effects include better access to bureaucratic processes and resources among dominant groups, as well as differential participation in decision-making. The study found no evidence that poverty increased among marginalized groups; rather, the program widened inequality because advantaged households benefited more. This highlights the challenge of ensuring equitable outcomes even in progressive, equity-focused decentralization programs, and emphasizes the need for stricter monitoring and targeted interventions to improve compliance with equity provisions.
The research also identifies areas for future investigation, including the role of local demographics, gender disparities, historical power structures, and ecological variation in shaping the effects of decentralization on inequality. While Nepal’s program has contributed to rural poverty alleviation overall, the persistence of ethnic and caste-based disparities suggests that policy refinements could enhance equity. Potential reforms include better enforcement of equity measures, targeted capacity-building for marginalized households, and complementary initiatives like resource-based commercial enterprises and payments schemes.
Methodologically, the study leveraged a large, nationally representative sample of over 500,000 households from two censuses and employed a robust two-way fixed-effects model to estimate within-ward poverty gaps. This approach allowed the researchers to isolate the association between program implementation and local inequality while controlling for time-invariant ward-level characteristics and national-level trends. Despite limitations, such as the absence of direct forest income data and potential heterogeneity in local program implementation, the findings provide rigorous evidence on how decentralized natural resource governance can simultaneously alleviate poverty and, under certain conditions, exacerbate inequality.
In conclusion, Nepal’s forestry decentralization program demonstrates the complex interplay between environmental governance, poverty reduction, and social inequality. While the program has had positive effects on overall rural poverty, its benefits have been distributed unevenly, reinforcing existing social hierarchies. Strengthening the enforcement of equity provisions, targeting marginalized groups, and integrating complementary measures could help achieve a more balanced distribution of benefits, ensuring that decentralization programs serve both conservation and social equity objectives.
