Contribution of migration and
remittances in comprehensive
development of Nepal: A discourse
Shiva Adhikari
Agenda
• Migration
• Remittances in comprehensive development of Nepal
• Situation of trade and commerce
• Development economics
Trend of migration
Flow of out migration
Remittances
Pull and push factors that drive to
outmigration.
Pull factors: opportunities for better employment, higher wages,
facilities, better working conditions, amenities and others.
Push factors: economic, social, political problems (political conflict)
and natural calamities among others.
Pull and push factors that drive to
outmigration.
Factors determining using NLSS
Variables dy/dx Linearized Std. Err. t value P value
Household size -0.0044 0.0032 -1.3800 0.1670
Education Categories
Primary or no education
Secondary education 0.0290 0.0144 2.0100 0.0440
Higher education -0.0729 0.0207 -3.5300 0.0000
Ecological belt
Mountain
Hill 0.0519 0.0234 2.2200 0.0260
Tarai 0.0705 0.0239 2.9500 0.0030
urban_rural (dummy) 0.1067 0.0167 6.3900 0.0000
poor (dummy) -0.0716 0.0326 -2.1900 0.0280
Consumption Quintile
First quintile
Second quintile -0.0855 0.0368 -2.3200 0.0200
Third quintile -0.0853 0.0420 -2.0300 0.0420
Fourth quintile -0.0805 0.0425 -1.9000 0.0580
Fifth quintile -0.0992 0.0449 -2.2100 0.0270
Education facilities categories
Poor education facility
Fair education facility 0.0513 0.0151 3.3900 0.0010
Good education facility 0.0103 0.0217 0.4700 0.6350
Electricity facilities categories
Poor electricity facility
Fair electricity facility 0.0410 0.0141 2.9100 0.0040
Good electricity facility 0.0601 0.0240 2.5000 0.0120
Ratio of food expenditure 0.1001 0.0496 2.0200 0.0430
Impact of outmigration
• Agriculture
• Population
• Socio-economic situation
• Production
• Urban migration
• ………………….and among others
Roles of remittances: Altruism, insurance,
Investment
• Altruism, the desire of the migrant to help family
members at home;
• Insurance, whereby migrants remit to insure their
family against adverse risks and shocks at home;
• Investment, whereby migrants remit either to invest at
home or to receive potential family bequests.
Roles of remittances: Health and Education
• international migration and remittances improve infant mortality and
child health, by raising household incomes and by increasing the
health knowledge of mothers.
• the impact of migration and remittances on school enrolment and
achievement is more controversial. While some studies find that
international remittances raise school retention rates, other studies find
that international migration has a negative effect on school attendance
rates for teenage boys and girls because of the absence of parents
during migration.
• Investment, and Entrepreneurial Activity
Roles of remittances: Poverty and inequality
• Many empirical studies have examined the impact of
remittances on poverty and inequality
• Most of these studies find that remittances reduce poverty in
developing countries; but we need to think about cost of
outmigration
• Mixed results for income inequality
Roles of remittances: Investment, and
Entrepreneurial Activity
• Consumption and investment
• Entrepreneurial Activity (very limited)
• remittances may allow households to overcome the type of
liquidity constraints that prevent the creation of new small
enterprises.
Roles of remittances: Labour Supply, and
Participation
• Most empirical studies find that international
migration and remittances tend to reduce household
labour supply and participation, although these
effects are sometimes influenced by gender
Roles of remittances: Socioeconomic, and political
reform
• Migration and remittances also affect social and political life
• could diminish pressure for domestic reforms
• But increase their voice in internal political affairs (negatively from
outside the country)
Determinates of remittances
• Choice of countries
• Skills of labour
• System or channel of sending remittances
Impact on growth
• There is negative association between remittances and real
GDP (economic growth) in the long run.
• In the short run, there is a positive association between
remittances and real GDP.
There is also a correlation between remittance
levels and disasters (loss of income, employment).
Impact of poverty
• The probability of households falling into poverty reduces by
4.8 percent with a one percent rise in household assets.
• Remittance receiving households are 2.3 percent less likely to
get caught in poverty as compared to remittance non-
receiving households.
• The probability of households plunging into poverty
decreases by about 1.1 percent with every 10 percent
increase in remittance inflows to households.
Result indicates long run linear relationship
between remittances and inflation.
Engle-Granger test for cointegration N (1st step) = 44
N (test) = 43
Test 1% Critical 5% Critical 10% Critical
Statistic Value Value Value
Z(t) -2.010 -4.163 -3.482 -3.145
Critical values from MacKinnon (1990, 2010)
Engle-Granger 1st-step regression
lgrem Coef. Std. Err. t P>|t| [95% Conf. Interval]
lgcpidex 2.870771 .0770282 37.27 0.000 2.715321 3.02622
_cons -.1030643 .255915 -0.40 0.689 -.6195217 .4133931
Engle-Granger test regression
D._egresid Coef. Std. Err. t P>|t| [95% Conf. Interval]
_egresid
L1. -.1640625 .0816192 -2.01 0.051 -.3287768 .0006518
Impact on growth
Sample: 1978 - 2018 Number of obs = 41
R-squared = 0.7317
Adj R-squared = 0.6167
Log likelihood = 124.95514 Root MSE = 0.0139
D.lggdp_real Coef. Std. Err. t P>|t| [95% Conf. Interval]
ADJ
lggdp_real
L1. -.457516 .1327067 -3.45 0.002 -.7293534 -.1856786
LR
lgrem -.1103186 .0381565 -2.89 0.007 -.1884786 -.0321586
lgGFCF_pri_r~l -.055463 .0628571 -0.88 0.385 -.1842199 .0732939
lgtot_Consum~l 1.684353 .2672864 6.30 0.000 1.136842 2.231865
SR
lggdp_real
LD. -.0448322 .1380738 -0.32 0.748 -.3276636 .2379992
L2D. -.5627759 .1189332 -4.73 0.000 -.8063996 -.3191522
lgrem
D1. .0434649 .0117513 3.70 0.001 .0193934 .0675365
LD. .0271462 .0106409 2.55 0.016 .0053493 .0489431
L2D. .013194 .0092129 1.43 0.163 -.0056778 .0320658
lgGFCF_pri_r~l
D1. .0327874 .0246198 1.33 0.194 -.0176439 .0832188
lgtot_Consum~l
D1. -.3498502 .1559986 -2.24 0.033 -.6693989 -.0303015
LD. -.4974126 .1181831 -4.21 0.000 -.7394997 -.2553256
_cons -3.110042 .725427 -4.29 0.000 -4.596012 -1.624072
Trends of remittances, banking credit to the private
sector and trade deficits
Import, export and remittances
Results
• The results indicate that Nepal has a symptom of
Dutch disease impacted by the inflows of
remittance.
• The results show that remittances have a strong
positive association with trade deficits. Our findings
indicate that remittances have contributed to trade
deficits in the long
Poverty reduction due to remittances: A system approach
A SYSTEMS VIEW OF THE ECONOMIC
CRISIS
Analyzing the root causes of complex
problems
Conclusions
• Remittances can increase the well-being of receiving households by
smoothing consumption and improving living conditions.
• Remittances can facilitate the accumulation of human capital,
promoting healthier life styles, access to healthcare, and greater
educational attainment.
• Remittances can ease the credit constraints of unbanked households
in poor rural areas, facilitate asset accumulation and business
investments, promote financial literacy, and reduce poverty.
Conclusions
• Remittances can reduce labor supply and create a culture of
dependency that inhibits economic growth and raises inequality.
• Remittances can increase the consumption of non-tradable goods,
raise their prices, appreciate the real exchange rate, and decrease
exports, thus damaging the remittance-receiving country’s
competitiveness in world markets.
• Remittances can have negative impacts on the environment and
promote some types of criminal activity.
