Dynamics of rural livelihoods and environmental reliance: Empirical evidence from Nepal

- We analyze environmentally augmented panel rural household income in Nepal.
- Six distinct livelihood strategies identified through latent class cluster models.
- Environmental income is important for all livelihood strategy groups.
- Lower remunerative livelihood strategies remain dominant over the years.
- Downward transition and low remunerative strategy show high environmental reliance.

Using environmentally augmented panel dataset of 2009 and 2012 from four districts in Nepal, we assess environmental reliance of households in different livelihood strategies and dynamic transition groups. We employ a latent class cluster analysis to determine the optimal number of livelihood clusters and assign individual households to particular cluster; and regression models were used to examine the covariates of change in environmental income and reliance. The analysis identifies six distinct livelihood clusters in terms of asset investment in different livelihood activities. Results show that majority of households persist in the relatively lower remunerative livelihood strategies between 2009 and 2012. Environmental income is important to all livelihood strategies. However, households in the least remunerative strategy and downward transition group have higher environmental reliance. It is also found that households with upward transition are likely to have reduced environmental dependency. Hence, enhancement of poverty reduction strategies in supporting poorer household in asset accumulation and undertake alternative higher remunerative livelihood strategies will eventually reduce the pressure and dependency on environment. Furthermore, conservation policies and natural resource management are critical in the study areas to sustain the increased demands on environmental products and services.