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The migration paradox: Why remittances fail to stimulate agricultural investment in Nepal's Terai plains

Author

Listed:
  • Krishna Sharma

    (Stanford University)

  • Ram N Shrestha

    (Kathamndu University)

Abstract

Nepal receives one of the highest remittance-to-GDP ratios globally, yet agricultural investment and productivity remain stagnant. Using primary survey data from 273 households in Nepal's Terai plains, this paper examines how international and internal migration shape land rental participation and fertilizer use intensity. Probit and Tobit estimates show that international migration significantly reduces both leasing-in and leasing-out of land and lowers fertilizer application by nearly 200 kg/ha. These findings contradict the New Economics of Labor Migration (NELM) prediction that remittances relax liquidity constraints and stimulate agricultural investment. Instead, the results suggest that migration-induced labor shortages and supervision constraints dominate capital inflows. The study highlights the limitations of remittance-led development strategies in settings with thin labor markets, weak mechanization, and supervision-intensive farming systems.

Suggested Citation

  • Krishna Sharma & Ram N Shrestha, 2025. "The migration paradox: Why remittances fail to stimulate agricultural investment in Nepal's Terai plains," Economics Bulletin, AccessEcon, vol. 45(4), pages 1649-1657.
    • Handle: RePEc:ebl:ecbull:eb-25-00579
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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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