1 What Drives Livestock Renting in Rural Nepal? Maoist War or Resource Constraints

This paper examined the factors that drive livestock rental market participation by using farm household data. Furthermore, it assessed if there exits any association between livestock and land rental markets. Double hurdle models were applied on both sides of the livestock rental markets separately. Results show that low caste households are more likely to rent in livestock as compared to high caste; and this is similar for male headed households and households with more male labor. Caste however, does not affect the likelihood to rent out livestock. The larger the owned livestock the less is the probability to rent in livestock and the amount to rent in. Owned livestock holding only affected the amount to rent out but not the likelihood. Owned land holding increased the amount of livestock to rent out. Households with migrated members are less likely to rent in and more likely to rent out livestock. Migration reduced the amount of livestock rented in and increased the amount rented out. This indicates that livestock renting is partly driven by land poverty and partly by Maoist war. A bivariate ordered probit model showed a significant positive association between the decision to participate in livestock and land rental markets. Key words: livestock rental market; land rental market; caste; Maoist war; Nepal 1