The Effect of Labor Market Performance on Deforestation in Developing Countries under Open Access: An Example from Rural Nepal

This research examines the deforestation behavior of smallholder agriculturalists as off-farm labor market conditions change. A model of a representative village is proposed, which incorporates dependence on open access forests for fuelwood and animal raising. Dynamic simulations are then presented, which compare time paths of forest stocks, deforestation levels, and household labor supply under a variety of conditions. Despite the open access regime assumed in the model, with a perfect, albeit low-wage, off-farm labor market, the agro-forestry system in Nepal is basically stable. An alternative model where there is no off-farm labor market eliminates the important features of adjustment to deforestation which generate forest stability, suggesting that the availability of off-farm opportunities is an important determinant of deforesting behavior and equilibrium forest stock levels.