Impact of Common Property Forest Incomes on Rural Income Inequality: A Gini Decomposition Analysis

Abstract

More than 300 million people the world over, especially the poor and marginalized, depend substantially on forest resources for their daily subsistence and survival. Several studies have confirmed that common property forest resources serve as an important life support system to the rural poor, a source of income for the marginalized and low income households and considerably impact household income distribution. With this background, the current piece of work has been conducted in the forest rich state of Odisha in India; where the forest covers 37.34 per cent of the state's geographical area and more than 57 per cent of the villages are located in forest fringe areas. The study has a threefold objective; firstly, it attempts to estimate the extent and nature of dependency of the rural households on common property forest resources. Secondly, it assesses the impact of forest income on household level income inequality, and thirdly, it examines the impact of different forest income sources on the overall income inequality. The research work is based on primary data collected through a micro-level sample survey conducted in 210 households in six villages of three blocks in the three districts of Odisha. The study has used the Gini-coefficient of inequality and its source-wise decomposition technique (Stuart [1954], Pyatt, Chen and Fei [1980], and Lerman and Yitzhaki [1985]) for investigation. The field survey results reveal that forest income sources contribute 30.97 per cent to the total household income. Further inclusion of forest income, in the total household income, brings down the Ginicoefficient of inequality by 26.638 per cent and hence, contributes substantially towards inequality reduction. The Gini decomposition analysis suggests that forest incomes, irrespective of their sources, serve as income equalizers (help reducing income inequality). Therefore, inequality in household level income distribution could be reduced considerably through appropriate policy interventions that would enhance household incomes from forest sources, while balancing the forest ecology.