Impact Of Remittance Flow On Economic Growth And Poverty Reduction In Nepal

Master's Thesis from the year 2015 in the subject Economics - Case Scenarios, grade: Very good, University of Glasgow (Adam Smith Business School), course: Master of Science in Economic Development, language: English, abstract: This research uses time-series data to examine the impact of international remittance flow on economic growth and poverty reduction in Nepal. It applies the econometric model suggested by Ravallion (2001), Ravallion and Chen (1997) and Adam and Page (2005) for remittance and poverty and Quayyum et al (2008) for remittance and growth. Both micro and macro level impacts were considered. The regression results show that remittance flow is positively and significantly correlated with economic growth and poverty reduction in Nepalese context. The finding suggests that in the short run international remittance flow had positive contribution in economic growth and poverty reduction through investments in health, education and consumption. Remittance also contributed to relax credit constraints, especially for the poor and in macro level, helped to finance trade deficit, accumulate foreign exchange reserves and to reduce government debt. However, a deeper analysis of the last two decades shows that increased remittance flow has been the major cause of decline of tradable sector through „Dutch Disease‟ effects. Moreover, remittance contributed to higher inflation, eroded work habits and brought adverse social costs. Combined, the long term impact of remittance seems to be overwhelmingly negative in Nepal.

Using two rounds of nationally representative household survey data in this study, the authors measure the impact on poverty in Nepal of local and international migration for work. They apply an instrumental variable approach to deal with nonrandom selection of migrants and simulate various scenarios for the different levels of work-related migration, comparing observed and counterfactual household expenditure distribution. The results indicate that one-fifth of the poverty reduction in Nepal occurring between 1995 and 2004 can be attributed to increased levels of work-related migration and remittances sent home. The authors also show that while the increase in work migration abroad was the leading cause of this poverty reduction, internal migration also played an important role. The findings show that strategies for economic growth and poverty reduction in Nepal should consider aspects of the dynamics of domestic and international migration.

Using two rounds of nationally representative household survey data in this study, the authors measure the impact on poverty in Nepal of local and international migration for work. They apply an instrumental variable approach to deal with nonrandom selection of migrants and simulate various scenarios for the different levels of work-related migration, comparing observed and counterfactual household expenditure distribution. The results indicate that one-fifth of the poverty reduction in Nepal occurring between 1995 and 2004 can be attributed to increased levels of work-related migration and remittances sent home. The authors also show that while the increase in work migration abroad was the leading cause of this poverty reduction, internal migration also played an important role. The findings show that strategies for economic growth and poverty reduction in Nepal should consider aspects of the dynamics of domestic and international migration.

This report identifies challenges in the migration process from Nepal to Qatar (related to high migration costs and their financing) and constraints in the remittance transfer process from Qatar to Nepal, which together limit the development and poverty reduction impact of remittance flows to Nepali households. The report analyzes migration practices, remittance transfer processes, and their underlying legal and regulatory framework in the Qatar-Nepal Corridor in order to provide policy recommendations that would help improve the scale and impact of remittance transfers from Qatar to Nepal, and enhance the integrity of migration and remittances in the corridor. These recommendations are especially important given that although Nepalis constitute around a quarter of the migrant labor-force in Qatar, they send home only 7 percent of total remittance outflows from Qatar. This corridor has several distinctive features. First, the majority of remittance flows from Qatar to Nepal are being transferred through officially regulated remittance channels. One of the reasons for this is actually the second feature of this corridor, namely, the officially managed migration process from Nepal to Qatar (as a result of which the majority of migrants are documented workers). The third feature is the contrast between the high competition and low prices of remittance services in this corridor on the one hand, and the contradictory rules and high costs incurred during the migration process on the other hand. Finally, as a by-product of the complex migration process which involves multiple players, financial transfers through informal mechanisms take place from Nepal to Qatar in order to pay the commissions of manpower agencies and middlemen. In Chapter I, the process of migration from Nepal to Qatar is explained and analyzed. Chapter II looks at the remittance transfer process from Qatar to Nepal. Chapter III provides an overview of the legal and regulatory framework underpinning remittance transfers in both in Nepal and Qatar. Finally, Chapter IV summarizes the main findings, identifies the main challenges and provides policy recommendations on how to improve the efficiency of the migration and the scale and impact remittance transfers in the corridor.

We propose a simple macroeconomic model with input-output sectoral linkages based on Acemoglu et al. (2016) to quantify how changes in aggregate demand due to additional income from household’s remittances propagates through the network of input-output linkages in Sub-Saharan African countries. We first propose two network centrality measures to assess the role of some sectors as key input providers in the economy. Then, we use these measures to quantify the effect of sectoral linkages on sectoral and total output following an increase in remittances inflows. Our empirical results suggest that the effects of remittances on recipient economies increase with the degree of linkages across sectors, which is especially prominent in the case of the financial intermediation sector. Our paper contributes to the emerging macroeconomic literature on the propagation of shocks across sectors and the implications for the whole economy.

This paper examines the impact of workers' remittances on growth and poverty reduction in developing Asia-Pacific countries using panel data over the period 1993-2003. The results suggests that, while remittances do have a significant impact on poverty reduction through increasing income, smoothing consumption and easing capital constraints of the poor, they have only a marginal impact on growth operating through domestic investment and human capital development.

This publication showcases the beginnings of the People‘s Republic of China–Asian Development Bank knowledge sharing platform, its context, activities, challenges, and lessons learned. It concludes by mapping out the next steps to bring it to its strategic mission.

This paper explores the impact of remittances on poverty, education, and health in 11 Latin American countries using nationally representative household surveys and making an explicit attempt to account for one of the inherent costs associated with migration -- the potential income that the migrant may have made at home. The main findings of the study are the following: (1) regardless of the counterfactual used remittances appear to lower poverty levels in most recipient countries; (2) yet despite this general tendency, the estimated impacts tend to be modes; and (3) there is significant country heterogeneity in the poverty reduction impact of remittances' flows. Among the aspects that have been identified in the paper that may lead to varying outcomes across countries are the percentage of households reporting remittances income, the share of remittances of recipient households belonging to the lowest quintiles of the income distribution, and the relative importance of remittances flows with respect to GDP. While remittances tend to have positive effects on education and health, this impact is often restricted to specific groups of the population.