Time Discount Rate of Forest-Dependent Communities: Evidence from Andhra Pradesh, India

Abstract

Executive Summary This study presents evidence on time discount rate of forest-dependent communities (FDCs) in the backdrop of the joint forest management program launched by the Government of India in 1990. The study uses data from two regions of the Indian state of Andhra Pradesh—Rayalaseema (a relatively dry forest region with low income) and the coastal region (relatively fertile forest and with higher income). We also identify socio-economic determinants of their patience levels and factors which distinguish the two regions. To elicit individual discount rates of FDCs members and their determinants, we use the choice task design methodology. Members from both regions were found to be highly impatient using the standard choice task design with the revealed time discount rate averaging 800% per annum. Members of FDCs from Rayalaseema were more impatient than their counterparts from the coastal region, although the statistical evidence is weak. We find no association between the income of members of FDCs and their time discount rate for both regions. Membership to caste categories showed a different response in both the regions, with members from the Scheduled Caste category and Other Backward Classes found to have a lower discount rate than those from the Scheduled Tribes category of Rayalaseema region and vice versa for the coastal region. For the coastal region, those with larger family size and heads of households were found to have a lower discount rate.