The Effects of Protected Forest Areas on Local Economic Development in Villages of Chaing Mai Province, Thailand: A Regression Discontinuity Approach

Abstract

"In response to concerns about deforestation and habitat loss, many countries around the globe have set aside large tracts of land with special conservation status. However such lands often contain existing human settlements, which face new legal restrictions on the use of land for agriculture or timber extraction. Is the economic development of communities inside protected areas harmed or helped by these environmental designations? Reasonable theoretical arguments point in both directions, but little is currently known about the sign or magnitude of the actual local effects of protected areas policies on a regional scale, particularly for communities in developing countries where many protected areas have recently been established.

"This paper analyzes how protected forest area policies in Chiang Mai Province, Thailand, have affected economic development at the village level, using survey data from the Thai Community Development Department gathered between 1986 and 2005 and GIS data on geographic features. The growth of key household assets shows a pattern of divergence in these years, with slower growth for villages inside of protected forest areas. To estimate policy effects, I use a regression discontinuity approach that relies on increases in the probability of designated status for villages above 500m in elevation. The results suggest that a decrease of approximately 20-30 percent in wealth is likely attributable to forest protection policies. Several possible specific mechanisms that could explain this divergence and are consistent with the data are hypothesized, including direct restrictions on agricultural land use and indirect effects through reduced access to credit, higher travel costs, fewer educational opportunities, or selective out migration. Future work should focus on understanding the contribution of these possible policy mechanisms, in order to minimize or overcome tradeoffs between conservation and development goals."