Nepal is one of the highest remittance receiving countries in the world, in percentage of gross domestic product (GDP). Remittances are not only defining household consumption and investment patterns, but are also transforming the structure and dynamics of the country’s overall economy. However, very little is known about its impact on the agriculture sector, which accounts for one-third of the country’s GDP. Using the most recent cross-section national level household data, this paper analyzes the effects of migration and remittances on agriculture yield. It shows two important results: (i) migration negatively affects agriculture yield, and (ii) remittance-receiving agricultural households have not demonstrated improvements in agriculture productivity, despite increased household incomes. It points to two important trends: (i) migration adversely affects agriculture yield by inducing a labor shortage in the sector, and (ii) the remittance-receiving households are not investing such incomes on productivity-enhancing agricultural capital goods and inputs. Therefore, a key development challenge for a highly remittance-dependent agrarian economy like Nepal is to incentivize remittance receiving agriculture households to invest in capital goods and inputs to improve agriculture productivity so that it more than compensates for the yield losses arising from labor migration.
URL : 20170615120930.pdf