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Forest protected areas are mostly located in developing countries, where forests are a main source of the traditional rural livelihood. This creates potential for conflict between local communities and biodiversity conservation. To explore this issue, we examine the case of forest protected areas (PAs) in Nepal. In the period of 1995-2003, the Nepalese government established several new protected areas (PAs) throughout the country. Using Nepal Living Standard Survey collected in 1995/1996 and 2003/2004, we evaluate the effects of these new PAs on household consumption and wood-collection effort by combining differences across regions with differences across time. The estimates suggest that the PA establishment has reduced average forest-good consumption by almost 30% to 70% compared to the pre-establishment period and this decrease has not translated into a larger market participation in fuel purchase. However, as described in previous literature, the estimates on welfare variable (in terms of per-capita consumption expenditure) does not suggest spillover impacts on the households from PA-based ecotourism industry in the study period. The paper also explores whether protected areas could be affecting households in other ways, such as by migration or inducing changes in labor supply.


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