Linking conservation and welfare: A theoretical model with application to Nepal

Theoretical articles linking conservation and welfare find a negative relationship between these two variables while empirical studies show that land protection may be positively related to welfare. Several authors attribute this empirical result to the development of ecotourism in protected areas. We thus argue that the gap between the theory and existing empirical results is partly explained by the fact that most theoretical models do not account for a productive activity on protected land. Therefore, we develop a theoretical model in which conservation allows developing an alternative sector and show that the relationship between conservation and welfare is U-shaped. We test this theoretical prediction using Nepalese data and find that conservation combined with ecotourism is indeed positively related to local welfare.