Conservation and welfare: Toward a reconciliation of theory and facts

Reducing extreme poverty and protecting the environment are two of the eight Millennium Development Goals (UN, 2012). Approximately 60% of the ecosystems currently used to produce goods and services are being exploited in an unsustainable manner. The establishment of protected areas is a widespread practice designed to curb environmental degradation. Between 1990 and 2011, the number of protected areas increased of 155% (WDPA, 2012). However, it is often criticized as limiting the expansion of agriculture and natural resource extraction, especially in poor regions (Ferraro et al., 2011). Others maintain that protected areas can increase welfare if the opportunity cost of conservation is less than the benefit generated by alternative uses of the land, such as ecotourism (e.g. Sims, 2010). The World Tourism Organization emphasizes that ecotourism development must, specifically, create income opportunities for local communities, while minimizing negative impacts on the natural environment (WTO, 2012). Ecotourism in protected zones thus appears to be this alternative use of the land, concurrently contributing to the goals of reducing poverty and protecting ecosystems (Andam et al., 2010; Sims, 2010). In the litterature, theoretical and empirical results on the relation between protected areas and welfare diverge. The few theoretical models developed so far generally assume that before being protected, land is used optimally. The establishment of a protected area thus constitute a constraint to this optimal use. Assuming as well that land protection does not generate other benefits at the local level, the main intuition emerging from these models is that protected areas will reduce economic wellbeing (Robalino, 2007; Robinson, Albers and Williams, 2008; Robinsin and Lokina, 2011). However, other authors have empirically tested the relation betweeen protected areas and welfare. For instance, four recent studies have been conducted in Costa Rica, Thailand and Bolivia (Andam et al., 2010; Sims, 2010; Ferraro and Hanauer, 2011; Canavire-Bacarreza and Hanauer, 2013). The authors all found that the establisment of protected areas contributed to economic development and poverty alleviation. They suggested that ecotourism development in the protected areas generated an income that was sufficient to compensate the loss caused by conservation. Moreover, Ferraro and Hanauer (2011) found an evidence that ecotourism contributes to poverty reduction in protected areas. The main objective of this paper is to increase the understanding of the link between conservation and poverty alleviation in order to contribute to the achievement of the Millenium Development Goals. To do so, we develop and test a theory explaining the relation between protected areas, ecotourism and wellbeing. We aim at reconciling the theoretical and empirical results found in the literature. We develop a static theoretical model consisting of one local agent and two sectors : extractive and ecotouristic. The model distinguishes itself because land protection allows to develop an alternative sector which generates a source of income at the local level. On the one hand, production in the extractive sector causes natural resources degradation. On the other hand, the ecotouristic sector produces from environmental quality. Therefore, the extractive sector causes a negative externality on the ecotouristic sector. At the same time, a planner imposes an environmental constraint that restrains the production in the extractive sector, which allows the ecotouristic sector to develop. This way, we relax the assumption generally made that land protection does not generate local benefit. The theoretical results are then tested on Nepalese data. We expect our theoretical model to reconcile the theoretical and the empirical results. The main expected result is that the alternative sector developed from land protection will affect the local welfare. The negative externality caused by the extractive sector, combined with the environmental constraint imposed by the planner, should generate a transfer of the production from the extractive towards the ecotouristic sector provided that the latter becomes more profitable. This way, land protection will be likely to generate an increase in the local welfare, as it is found in the empirical literature. The model will also allow to verify the natural resource extraction rate according to the environmental constraint severity. This result will be relevant for the purpose of environmental policies.