of household income including wages. Both rounds also have a detailed module on remittances received by households during the month of the survey as well as the age and migration destination of the senders. The surveys also had a community component in which various community level characteristics were recorded.

For our analysis in this paper, we focus primarily on rural wards. This is for two reasons. First, the dependence of households on forests is more pronounced in villages than in urban areas. Second, roughly 73 percent of remittance receiving households resided in rural areas in 1995. This number had gone up to 75 percent in 2004. A natural level of geographical aggregation for us would have been the level of the district. However, aggregating at such a high level would come at a cost, particularly because it is difficult to regard a district as one, closed, isolated economic unit. Instead, what we do is geocode sampled villages and manually inspect their geographic location. If a pair of villages, within a district, sampled in two different survey years is separated in space by up to two other villages, we consider this cluster of villages to be one. Using this method, we end up aggregating at a much smaller level and ensuring that the villages in a cluster are part of the same “local market” and we obtain a panel of 122 village clusters that form the unit of analysis in our empirical work.

Mean characteristics of these village clusters are presented in Table 2. Total forest area per household declined from 6.6 hectares from 1995/96 to 5.0 in 2003/04. In terms of forests share of total village area, the fraction was 52 percent in 1995/96 and 44 percent in 2003/04. Real per capita remittances increased from Rs. 455.4 to Rs. 1012.5 during this period and was accompanied by an increase in mean daily wages from Rs. 22.1 to Rs. 44.3. During this period, there was a decline in the average price of land and a significant increase in the real incomes of rural households, particularly the non-poor households. Nevertheless, incidence of poverty declined in the sampled villages from 49 percent in 2003/04 to 35 percent in 2003/04. The fraction of sampled villages with some form of community forestry user groups increased from 37 percent to 59 percent during this period. Note also that while in general village population increased in our sample villages, the population of males in the age group 15-29 actually declined.

In Table 3, we present statistics on the use of forest resources in these rural villages. Firewood is used as a primary source of cooking and heating fuel in rural Nepal. In our sample, the mean fraction of households that used firewood as primary fuel was 93 percent in 1995/96 and had gone up to 96 percent in 2003/04. Of the households that use firewood as their primary fuel, a significant majority appear to collect their own firewood. Roughly 62 percent of firewood that was collected in 1995/96 was collected from government forests. In 2003/04, however, this number had declined to 39 percent as the tracts of government land were progressively handed over to local communities for management and the fraction of firewood collected from community forests rose from 12 percent to 34 percent. The other major use of forests is extraction of fodder for livestock. The pattern of forest use for fodder is similar to that of 20