Environmental Dependence and Economic Vulnerability in Rural Nepal

Resham Thapa-Parajuli, Sanjeev Nhemhafuki (), Bipin Khadka and Roja Pradhananga
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Sanjeev Nhemhafuki: Central Department of Economics, Tribhuvan University, Kirtipur 44618, Nepal
Bipin Khadka: Central Department of Economics, Tribhuvan University, Kirtipur 44618, Nepal
Roja Pradhananga: Central Department of Economics, Tribhuvan University, Kirtipur 44618, Nepal

Sustainability, 2025, vol. 17, issue 6, 1-22

Abstract: This article examines the relationship between environmental income dependence and household vulnerability in rural settings. Using household-level livelihood data from the Poverty Environment Network (PEN) dataset of Nepal, we construct a household vulnerability index and analyze its relationship with environmental dependence, measured as the share of environmental income in total income, while controlling for other variables. The findings reveal that higher environmental dependence significantly increases household vulnerability. In contrast, household debt helps mitigate vulnerability by providing financial support and enabling productive investments. However, high dependency ratios and exposure to shocks exacerbate vulnerability by limiting income generation and destabilizing livelihoods. Policy measures such as promoting economic diversification and social safety net programs could reduce environmental dependence and mitigate household vulnerability in rural Nepal. Furthermore, providing timely access to credit during hardships and addressing unforeseen shocks could enhance household resilience.

Keywords: vulnerability; environmental dependence; panel regression (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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