Do remittances reshape household expenditures? Evidence from Nepal. (September 2022)

• Record Type: Journal Article
• Authors: Mishra, Khushbu; Kondratjeva, Olga; Shively, Gerald E.
• Is Part Of: World development. Volume 157(2022)
• Publication Date: 2022-09
• Subjects: I00 -- O12 -- O15 -- Q18; Remittances -- Household expenditures -- Instrumental variable -- Nepal -- South Asia; Economic history -- 1990- -- Periodicals; Economic assistance -- Developing countries -- Periodicals; 330.9
• DOI: 10.1016/j.worlddev.2022.105926
• Languages: English
• ISSNs: 0305-750X

Abstract

Highlights: The impact of remittances on household expenditures is studied using data from the 2010/11 Nepal Living Standards Survey. Remittances are associated with increases in household expenditures on food, clothing, and education. Remittances are associated with reductions in household expenditures on alcohol and tobacco. Male- and female-headed households tend to spend remittance income in similar ways. Remittance-related increases in food and education expenditures can improve human capital and overall economic development. 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.