IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v13y2025i6p163-d1673091.html
   My bibliography  Save this article

The Role of Remittances in Household Spending in Rural Nepal

Author

Listed:
  • Resham Thapa-Parajuli

    (Central Department of Economics, Tribhuvan University, Kathmandu 44600, Nepal)

  • Tilak Kshetri

    (Central Department of Economics, Tribhuvan University, Kathmandu 44600, Nepal)

  • Sanjit Singh Thapa

    (College of Business, University of Nebraska-Lincoln, Lincoln, NE 68588, USA)

Abstract

Foreign remittances have become a crucial component of the Nepalese economy. This study investigates the impact of remittances on household consumption patterns in rural Nepal using data from the World Bank’s Nepal Household Risk and Vulnerability (NHRV) Survey Panel, covering the period from 2016 to 2018. Employing an instrumental variable regression approach, we estimate the elasticity of remittances to various consumption categories. Our findings indicate that foreign remittances significantly affect total consumption expenditure. Disaggregated results reveal that remittances positively influence spending on food items and non-food categories such as education and healthcare, highlighting their role in enhancing nutrition and human capital development. However, remittances do not contribute to unproductive expenditures like tobacco, alcohol, or rituals. Therefore, other things remaining the same, remittance is enhancing welfare in rural Nepali households.

Suggested Citation

  • Resham Thapa-Parajuli & Tilak Kshetri & Sanjit Singh Thapa, 2025. "The Role of Remittances in Household Spending in Rural Nepal," Economies, MDPI, vol. 13(6), pages 1-23, June.
    • Handle: RePEc:gam:jecomi:v:13:y:2025:i:6:p:163-:d:1673091
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/13/6/163/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/13/6/163/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Adams Jr., Richard H. & Cuecuecha, Alfredo, 2010. "Remittances, Household Expenditure and Investment in Guatemala," World Development, Elsevier, vol. 38(11), pages 1626-1641, November.
    2. Sridevi Yerrabati, 2024. "Path to achieving SDG 8: do worker remittances reduce vulnerable employment?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 52(3), pages 500-517, June.
    3. Yogeeswari Subramaniam & Tajul Ariffin Masron & Nik Hadiyan Nik Azman, 2021. "Remittances and food security," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 49(4), pages 699-715, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lankoande Lamoussa Seydou, 2023. "Effects of remittances on food security in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 35(2), pages 126-137, June.
    2. Michael E. Cummings & Alan Gamlen, 2019. "Diaspora engagement institutions and venture investment activity in developing countries," Journal of International Business Policy, Palgrave Macmillan, vol. 2(4), pages 289-313, December.
    3. Laetitia Duval & François-Charles Wolff, 2016. "Do remittances support consumption during crisis? Evidence from Kosovo," Oxford Development Studies, Taylor & Francis Journals, vol. 44(4), pages 479-492, October.
    4. Li, Linfei & Khan, Sufyan Ullah & Guo, Chenhao & Huang, Yanfen & Xia, Xianli, 2022. "Non-agricultural labor transfer, factor allocation and farmland yield: Evidence from the part-time peasants in Loess Plateau region of Northwest China," Land Use Policy, Elsevier, vol. 120(C).
    5. Aggarwal, Reena & Demirgüç-Kunt, Asli & Pería, Maria Soledad Martínez, 2011. "Do remittances promote financial development?," Journal of Development Economics, Elsevier, vol. 96(2), pages 255-264, November.
    6. Driouchi, Ahmed & Zouag, Nada, 2010. "Internal Mobility and Likelihood of Skill Losses in Localities of Emigration: Theory and Preliminary Empirical Application to Some Developing Economies," MPRA Paper 21799, University Library of Munich, Germany, revised 01 Apr 2010.
    7. Kabinet Kaba & Mahamat Moustapha, 2021. "Remittances and firm performance in sub-Saharan Africa: evidence from firm-level data," Working Papers DT/2021/07, DIAL (Développement, Institutions et Mondialisation).
    8. Andaleeb Rahman & Sumit Mishra, 2020. "Does Non-farm Income Affect Food Security? Evidence from India," Journal of Development Studies, Taylor & Francis Journals, vol. 56(6), pages 1190-1209, June.
    9. Randazzo, Teresa & Piracha, Matloob, 2019. "Remittances and household expenditure behaviour: Evidence from Senegal∗," Economic Modelling, Elsevier, vol. 79(C), pages 141-153.
    10. Ma, Yechi & Chen, Zhiguo & Shinwari, Riazullah & Khan, Zeeshan, 2021. "Financialization, globalization, and Dutch disease: Is Dutch disease exist for resources rich countries?," Resources Policy, Elsevier, vol. 72(C).
    11. Clemens, Michael A., 2021. "Violence, development, and migration waves: Evidence from Central American child migrant apprehensions," Journal of Urban Economics, Elsevier, vol. 124(C).
    12. Oteng-Abayie, Eric & Awuni, Prosper Ayinbilla & Adjei, Thomas Kwame, 2020. "The Impact of Inward Remittances on Economic Growth in Ghana," African Journal of Economic Review, African Journal of Economic Review, vol. 8(3), November.
    13. Chakra P. Acharya & Roberto Leon-Gonzalez, 2016. "International Remittances, Rural-Urban Migration, and the Quest for Quality Education: The Case of Nepal," GRIPS Discussion Papers 15-25, National Graduate Institute for Policy Studies.
    14. Bharati Basu & Irudaya Rajan, 2018. "Investment Expenditure Behavior of Remittance Receiving Households: An Analysis Using Reserve Bank of India Data," Migration Letters, Migration Letters, vol. 15(3), pages 303-320, July.
    15. Björn NILSSON, 2019. "Education and migration: insights for policymakers," Working Paper 23ca9c54-061a-4d60-967c-f, Agence française de développement.
    16. Bierkamp, Sina & Nguyen, Trung Thanh & Grote, Ulrike, 2021. "Environmental income and remittances: Evidence from rural central highlands of Vietnam," Ecological Economics, Elsevier, vol. 179(C).
    17. Démurger, Sylvie & Wang, Xiaoqian, 2016. "Remittances and expenditure patterns of the left behinds in rural China," China Economic Review, Elsevier, vol. 37(C), pages 177-190.
    18. Ghorpade, Yashodhan, 2017. "Extending a Lifeline or Cutting Losses? The Effects of Conflict on Household Receipts of Remittances in Pakistan," World Development, Elsevier, vol. 99(C), pages 230-252.
    19. Ambrosius, Christian & Cuecuecha, Alfredo, 2014. "Do remittances increase borrowing?," Discussion Papers 2014/19, Free University Berlin, School of Business & Economics.
    20. Calogero Carletto & Jennica Larrison & Çaglar Özden, 2014. "Informing migration policies: a data primer," Chapters, in: Robert E.B. Lucas (ed.), International Handbook on Migration and Economic Development, chapter 2, pages 9-41, Edward Elgar Publishing.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:13:y:2025:i:6:p:163-:d:1673091. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.