Transaction costs and community-based natural resource management in Nepal

Published Date
January 2006, Vol.78(1):5–15, doi:10.1016/j.jenvman.2005.04.005

Author 

• Bhim Adhikari ^,
 
• Jon C. Lovett 

• Centre for Ecology, Law and Policy, Environment Department, The University of York, Heslington, York YO10 5DD, UK

Received 26 April 2004. Accepted 11 April 2005. Available online 25 July 2005.

Abstract

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.

Keywords

Common pool resources

Community forestry

Transaction costs

Equity

Collective action

Nepal

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