Macroeconomics

Agriculture

Labour economics

Remittance

Statistics

Excise

Clothing

Wage

Accounting

Archaeology

Economics

Market economy

Mathematics

Survey data collection

Geography

Demographic economics

Earnings

Econometrics

Productivity

Sociology

Human capital

Instrumental variable

Consumption (sociology)

Economic growth

Tobit model

Household income

Standard of living

Socioeconomics

Social science

World Development

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.

Do remittances reshape household expenditures? Evidence from Nepal