Resettlement: A New Paradigm




By Montri Suwanmontri

Resettlement refers to the relocation of people displaced because of large-scale national development projects. These people must move from areas where they have lived and worked to other locations. The term resettlement also refers to re-establishing livelihoods and social communities, as well as reconstructing houses and other infrastructure.

Resettlement of people affected by hydroelectric project development requires years of planning and implementation. Naturally, resettlement is a complex process that must be handled appropriately in order to have the best possible outcome for all parties, including the hydro project developer.

Because of the importance of this topic, the author performed a review of papers and studies published from the 1970s through the 1990s on the topic of population resettlement and rehabilitation. As a result of this review, the author determined there are no direct theories for resettlement development.1,2,3,4,5,6,7,8

This lack of a direct theory imposes a significant constraint on planning and implementing population resettlement and rehabilitation programs, particularly in developing countries. Thus, the author set out to develop such a theory, based on the concept of consumer utility. The resulting theory can be applied to any kind of development project that requires relocation of affected people.


To establish a reasonable resettlement theory, the author started with consumer behavior. (It is worthwhile to note that people affected by the development of hydroelectric projects typically live in remote areas and thus their behavior may be somewhat different from that of the ‘average' consumer.)

It is assumed that consumers have preferences among the bundles of commodities and services they might buy. A bundle is a set of specific amounts of each commodity or service. A utility function is a rule for attaching numbers to various bundles so that the preferred one is assigned the largest number. In a world of certainty, a consumer need only rank bundles to make choices among them. This allows development of a set of utility numbers that ranks bundles in the same order as the consumers' preferences, and no significance attaches to the specific number chosen. For that reason, utility functions are said to be ordinal.

Equation 1 expresses a consumer's utility function (u) if there are two commodities consumed in amounts y1 and y2.

Equation 1
u = u (y1, y2)

In economics, utility is a measure of relative satisfaction. Given this measure, one may speak meaningfully of increasing or decreasing utility and thereby explain economic behavior in terms of attempts to increase one's utility. Often utility is modeled to be affected by consumption of various goods and services, possession of wealth, and spending of leisure time.

Another assumption is that the economic system better satisfies an individual's needs and wants, or improves the individual's welfare, in situation A compared with that of B if the allocation of resources in A places the individual on a higher indifference curve than in B. An indifference curve is a graph showing different bundles of goods and how a rational consumer chooses between two bundles of goods.

Almost every change in government programs and policies makes some individuals better off and some worse off. To evaluate such changes, economists distinguish between social efficiency and the equity of the economic system. An allocation of resources is said to be socially efficient if no reallocation could improve the welfare of one or more people without making others worse off.

Redesigning land settlement

Land settlement usually is carried out as one of the core activities during construction of a dam and reservoir. In most cases, the direct effects of the development work fall on people who reside in the project areas. For the project to be realized, some, if not all, of the affected people will be relocated. Regrettably, these people are often forced to comply with the plan. Given that situation, the following three questions should be pondered:

— How do we justify the resettlement in economic theoretical terms?

— What kind of program design should be used to mitigate potential negative effects?

— What should be the main features of such a design?

A theoretical paradigm for resettlement

The goal of a development project is to improve the overall economic and social welfare of people, including those affected by the project. This can be expressed as:

Equation 2
W = f (P, X)


— W is the social welfare such that W = (w1 + w2 + ............. wn)Ç;

— P is project inputs (i.e., economic and social rehabilitation programs provided to the resettled people);

— X is other activities (i.e., consumption of goods and services) contributing to affected people's welfare that are not provided by the project;

— Ç is the cardinal utility that is assumed for individuals such that individual 1 to n's welfare adds up to the welfare of a society; and,

— w is the many elements that comprise the social welfare, such as education and health care.

Social welfare can be improved directly by project activities that contribute to increasing utility. Suppose a person is to be relocated. There are two ways to compensate that person so that their welfare at least stays the same. The first is to buy them out, thereby transferring income such that their purchasing power in the market place stays the same or they maintain their real income. The second is to subsidize the affected person by lowering prices in the marketplace so that they obtain the same amount of goods and services as before. This second alternative is more difficult to devise because of the wide range of goods and services that may be purchased by the individual.

It is clear that the buying out approach involves, to a certain extent, a bidding game in which a relocated person is to be paid to their satisfaction (i.e., until they feel justly compensated). This poses a problem. How can one be sure they will ever be satisfied? The payment is also calculated on the assessed amount of damage and the project's ability to pay. Thus, there is a gray area of willingness to accept and willingness to pay. Negotiation, which is costly, can settle the final actual payment.

Regardless of the final amount a particular person agrees to receive, once this amount is received, they have maximized their utility.

Welfare of the individual (Wi) is a function of endowments of existing assets (E), prices of traded goods and services (π), and money income (M).

Equation 3
Wi = f (E, π, M)

Wi is the result of maximizing utility or welfare, subject to facing price π, given endowments E and income M. This is called the indirect utility function or individual welfare function.

Welfare before resettlement was:

Equation 4
Wi0 = f (E0, π0, M0)

Welfare after resettlement is:

Equation 5
Wi1 = f (E0 - e0, π0 - s, m + M0)


— e0 is the loss of endowment as a result of the person's relocation;

— s is subsidy on prices given to resettled people; and,

— m is income compensation.

The compensation package can be designed by either compensating the person with additional income only or by compensating the person with price subsidy.

Package 1 consists of M0:

Wi0 = f (E0 - e0, π0, M0 + m0)

Package 2 consists of s0:

Wi0 = f (E0 - e0, π0 - s0, M)

Both packages give us the willingness to accept of the affected individuals.

Click to Enlarge

Figure 1 (right) illustrates the structure of Package 1. After resettlement, welfare would decline to Wi1 (from points A to B). The resettled person seeks extra income (m0) to compensate for the loss of endowment such that the individual returns to welfare Wi0 (point C). To measure willingness to pay, the resettling company would seek the reduction in income m* such that, with the same endowments as before resettlement, the individual would remain at the same level of welfare as Wi1. Therefore, willingness to pay is not suitable for resettlement programs.

It should be noted that individuals are offered different amounts of compensation. These may require negotiation not only because of differences in assessed damage but also because of willingness to accept. At the very least, the compensation received should not result in the individual being worse off after the resettlement.

Click to Enlarge
Development of the 240 MW Rajjaprabha project in southern Thailand required resettlement of 385 households. This resettlement program, carried out from 1982 to 1987, included providing each household a 0.16 ha home plot and a 3.04 ha rubber farm.

Designing a resettlement scheme

The main feature of a resettlement design is the inclusion of measures that ensure that the social welfare of an affected individual is at least maintained after compensation. The project inputs in Equation 1 should include activities that contribute positively to welfare. The list of activities may be endless, but one of the major components is income. Income buys goods and services, which contribute directly and positively to utility. The effectiveness of adjusting or improving the earning ability of the resettled people depends on two major groups of variables: their characteristics (i.e., occupation, skills, etc.) and the economic rehabilitation inputs (e.g., size of the land holding, quality of the soil, compensation, and other economic assistance).

Equally important are living standards, which can be subjectively measured by the satisfaction of resettled people with regard to infrastructure, facilities, and the social services they receive. These provided facilities and services may include: communication and transportation systems; electricity supply and water works systems; and education, health, and religious services. Other factors — such as quality of housing, household properties, opportunity for leisure, and the resettled people's participation in development — also positively contribute to utility.


The author is grateful for the valuable suggestions and comments provided by Dr. Anil Markandya, professor at the University of Bath, United Kingdom, and Dr. Sitanon Jesdapipat, associate professor at Chulalongkorn University.


1Dawes, F.W.H., The Elements of Human Settlements, Canadian International Development Agency, Gatineau, Quebec, Canada, 1978.

2Jones, G.W., and H.V. Richter, Population Resettlement Programs in Southeast Asia, The Australian National University, Canberra, Australian Capital Territory, Australia, 1982.

3Thapa, G.B., and K.E. Weber, K.E., Land Settlement in Tropical Asia, Prospects for an Alternative Planning Strategy, Asian Institute of Technology, Pathumthani, Thailand, 1988.

4Cernia, M.M., Involuntary Resettlement in Developing Projects, Policy Guidelines for World Bank-Financed Project, World Bank Technical Paper No 80., The World Bank, Washington, D.C., USA, 1988.

5Qureshi, M., Resettlement, Development, and the World Bank, The World Bank, Washington, D.C., USA, 1989.

6Scudder, T., "A Sociological Framewok for the Analysis of New Land Settlements," in Putting People First, Sociology Variables in Rural Development, 2nd.edition, Oxford University Washington, D.C., USA, 1991.

7Schuh, G.E., Involuntary Resettlement, Human Capital and Economic Development, Westview Press, Boulder, Colo., USA, 1993.

8Appleby, G., "World Bank Experience and Guidelines on Involuntary Resettlement," in Proceedings of International Seminar on Resettlement and Rehabilitation, Hohai University Press, Nanjing, China, 1995.

Montri Suwanmontri, PhD, is a regional environment/social and resettlement specialist based in Bangkok, Thailand. He has been involved with resettlement planning and implementation for several hydropower projects, including Rajjaprabha Multipurpose Project in Thailand, Don Sahong Hydropower Project in Laos, and Ta Sang Hydropower Project in Myanmar.

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This article has been evaluated and edited in accordance with reviews conducted by two or more professionals who have relevant expertise. These peer reviewers judge manuscripts for technical accuracy, usefulness, and overall importance within the hydroelectric industry.

This article has been evaluated and edited in accordance with reviews conducted by two or more professionals who have relevant expertise. These peer reviewers judge manuscripts for technical accuracy, usefulness, and overall importance within the hydroelectric industry.

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