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Do remittances reshape household expenditures? Evidence from Nepal

Author

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  • Mishra, Khushbu
  • Kondratjeva, Olga
  • Shively, Gerald E.
Abstract
Lack of economic opportunities in their local communities push many individuals to migrate and send remittances to their families. Remittances can potentially influence household spending in sizeable ways, making it an important source of income. This article investigates the impact of remittances on various categories of household expenditure, including those for food, alcohol and tobacco, clothing, ceremonies, healthcare, education, home improvement, agriculture, and livestock. Using data from 5,987 households observed in the 2010/11 Nepal Living Standards Survey and applying an instrumental variable approach, we show that remittances are positively associated with expenditures on food and education. In contrast, we find a negative association between remittances and expenditures on alcohol and tobacco. We further disaggregate our analysis to investigate any differential impact of remittances by gender of the household head and find qualitatively similar results across both genders, suggesting that both male- and female-headed households generally tend to spend remittances in similar ways. Findings regarding household food consumption and education expenditures are generally consistent with previous research on remittances in Nepal, but expand our understanding by examining the impacts of remittances on expenditures on tobacco and alcohol, ceremony, agriculture, and livestock purchases. Through increased consumption of food and greater expenditures on education, remittances have implications for long-term investments in human capital, which can, in turn, increase labor productivity, wage earnings, and overall economic development.

Suggested Citation

  • Mishra, Khushbu & Kondratjeva, Olga & Shively, Gerald E., 2022. "Do remittances reshape household expenditures? Evidence from Nepal," World Development, Elsevier, vol. 157(C).
    • Handle: RePEc:eee:wdevel:v:157:y:2022:i:c:s0305750x22001164
    DOI: 10.1016/j.worlddev.2022.105926
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    More about this item

    Keywords

    Remittances; Household expenditures; Instrumental variable; Nepal; South Asia;
    All these keywords.

    JEL classification:

    • I00 - Health, Education, and Welfare - - General - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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