Ecosystem Wellbeing and Rural Livelihood Resilience: Pathways for Sustainable Nature Reserve Management in Southwest China

The establishment of nature reserves (NRs) in Southwest China has created tensions between conservation and local livelihoods by restricting local communities’ access to natural resources essential to their livelihoods. Understanding farmers’ compensation preferences and livelihood support needs can inform ecological compensation design in communities surrounding nature reserves. This study evaluates the design of ecological compensation policies by examining the preferences of 872 farming households living near 21 NRs in Yunnan Province. A random parameter logit model was used to capture preference heterogeneity, and a latent class model was used to identify distinct household segments. Farmers’ marginal willingness to accept (MWTA) for different policy attributes was quantified, and welfare changes under alternative policy scenarios were estimated using compensating surplus (CS) analysis. The results indicate substantial heterogeneity in farmers’ preferences. Cultural and material compensation were particularly valued, with monetary equivalents of approximately 224.76 and 218.91 CNY/ha/year, respectively. These findings suggest that livelihood support needs extend beyond cash payments. Among the scenarios evaluated, a scheme combining multiple forms of support yielded higher estimated welfare than single-support schemes. Farmers engaged in non-agricultural work, those with low social capital, and those belonging to the Han ethnic group show a lower willingness to participate in the compensation schemes. The findings inform the design of ecological compensation schemes that better reflect farmers’ preferences, livelihood support needs, and local contexts, offering insights into how conservation objectives may be reconciled with rural livelihoods.