for the fixed effects and FE-IV specifications. Road density has a negative sign across all specifications although it is never significant. Presence of community forestry user groups has a significantly positive association with forests only in the OLS specification. In the FE-IV specification it actually appears with a negative sign indicating the possibility that the handover of forests to communities for management may actually be taking place in villages with deteriorating forest conditions.

In order to investigate the possible channels through which remittances may affect forests, we run reduced form regressions of the key endogenous variables - wages, land prices and household income. We present the results in Table 7. From the theoretical framework we developed, we should expect remittances to have a positive effect on household income and an unambiguously negative effect on land prices. The effect on local wage is theoretically ambiguous. From the FE-IV specification in Table 7, we find the data to be broadly consistent with the predictions of theory. Land price appears with a significant negative sign while household income has a strong positive correlation with remittances. Wages seem to have a positive and significant relationship with remittances as well. The size of the village population has a positive effect on land price and household income but the relationship is not significant for the FE-IV specification. The size of the staying population as well as the share of this population that is young seem to have a significant negative association with wages which is consistent with what we would expect from theory.

Finally, we estimate an equilibrium regression for forests in order to test the strength of the feedback from the endogenous variables on equilibrium forest area. An additional benefit of this step is also that it allows us to test the assumption of first-best management of forests. The prediction from theory is that if forests are first-best efficiently managed then net of its effect on local wages, rents and income, the size of the population should have no effect on forests. The population variable appears significant in the OLS specification for forest area per household measure, but as we control for village fixed effects, it becomes indistinguishable from 0. On the other hand, the only variable that remains statistically significant after controlling for the possible endogeneities is the household income variable, which suggests that the only channel through which remittances have an effect on forests is through the household income. Though significant only in the OLS specification, the coefficient on land price is consistently negative confirming the prediction we had from theory. Finally, given the results from our reduced form regressions in Table 6 we would expect the depopulation of the youngest age group due to migration and the consequent inflow of remittances both to raise wages. However, from the equilibrium regressions it appears that net of their contributions to raising incomes, wages have no independent effect on either measure of forest area.

# **5.3 Robustness**

Both rounds of the living standards survey contained a community questionnaire that collected information from village representatives on the subjective perception of whether overall forest area 25