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Perverse Incentives, Deforestation, and the Impact on Communities
Forest mismanagement has contributed to the alarming degradation of the natural resource base, especially primary forests in the North West Frontier Province (NWFP) and Northern Areas of Pakistan. The impacts have tracked through the institutional route and to a considerable extent are sourced in economic and market forces. These forces constitute part of a complex mix of perverse incentives, which include among other things the rapid rise in timber prices over the past two decades, the decline in real salaries of forest department officials, fines and penalties which have not kept pace with forest violations and ill-defined community resource rights. In the institutional context, these perverse incentives have weakened the forest management system, traditionally characterized as territorial and enforcement oriented. There is a clear link between perverse incentives and resource degradation. Resource degradation in turn, impoverishes resource dependent communities. This represents one flow of causality in the phenomenon referred to as the poverty-environment nexus. The aim of the study is to quantify and assess the economic and institutional causes and effects of degradation. The findings will form the basis of recommendations for community- friendly policy and institutional reform, in general, and for the transformation of perverse into benign incentives, in particular. Both sets of recommendations aim to halt the vicious spiral of poverty and environmental degradation.