The Impacts of Migration and Remittances on Nepali Agricultural Households

• In Event: Migration & Population Issues in International Contexts

Abstract

Migration has become one of the most important livelihood strategies for rural households in developing countries, but its implications for the agricultural sector in the case of Nepal remain poorly understood. As large shares of the rural labor force migrate both domestically and internationally, questions about what happens to the farms and households left behind have significant consequences for food security, rural livelihoods, and broader economic development. This paper uses three waves of the Nepal Living Standards Survey (NLSS 2003, 2010, 2022) covering roughly 12,000 households to investigate how local migration opportunities shape agricultural outcomes. To address the endogeneity of migration decisions, I construct a district-level migration opportunity variable using a shift-share instrument, which isolates exogenous variation in local migration opportunities driven by broader national migration trends interacted with historical district-level migration patterns. This identification strategy allows for more credible causal reduced form estimates. My findings suggest that migration opportunity has not led to an increase in aggregate agricultural outcomes such as expenditure, sales, and profit. Rather, there has been a reallocation within agricultural expenditure, specifically a shift towards hiring outside labor, potentially crowding out other productive agricultural investments. Notably, expenditure on fertilizers and pesticides shows a marginal but significant decline, suggesting a broader reallocation away from non-labor inputs. This pattern is consistent with a labor-substitution effect, where households compensate for the loss of family labor through hired workers, without generating broader agricultural growth. These results contribute to a growing literature on the relationship between migration, remittances, and economic development. Contrary to optimistic accounts that frame remittances as a driver of rural investment and productivity, the findings from Nepal suggest a more cautious interpretation, that migration and remittances may not be improving agricultural development prospects in the ways that some prior research suggests. The policy implications are significant for Nepal and other migration-dependent developing economies.

Author

• Ruzel Shrestha, Syracuse University
  Presenting Author