Natural resource extraction and household welfare in rural Laos

Abstract

Abstract Degradation of natural resources is a threat to sustainable development in many developing countries. Solving this requires an understanding of the factors affecting the extraction of and the dependence on the resources as well as the impacts on rural welfare. In this study, we identify the factors affecting the extraction of and the dependence on forest and water resources and examine the impacts of the extraction on rural household welfare in Laos. We address our research questions with an econometric framework that models the extraction and its implications simultaneously. We use the data of 430 rural households from a survey undertaken in 2013 in 38 villages of Savannakhet Province. Our findings show that extracting forest and water resources is a shock‐coping strategy of rural households but contributes to reducing household income inequality. For extracting households, the extraction increases household income, consumption, and food security. However, for nonextracting households, although participating in the extraction would increase food security, it would reduce their income and consumption. We suggest that promoting rural education and off‐farm employment opportunities and enhancing investments in physical infrastructures would reduce the extraction of and the dependence on the resources of extractors and prevent nonextractors from being forced to extract the resources.