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Ungrateful children: migration intensity and remittances in Nepal

Listed author(s):
  • François Libois
  • Vincent Somville

Poverty has declined dramatically in Nepal since the end of the conflict. The sharp increase in revenues primarily comes from remittances. From a household’s perspective, choosing the appropriate number of migrants is crucial: they must trade-off the direct cost and loss of local income earners versus the potential remittances. We build a standard game theory model of remittances to emphasize two effects of the number of migrants on the total remittances received that go in opposite directions. On one hand, if each migrants earns more than when he stays home, then there is more to remit, and we expect higher total remittances. On the other hand, when there are more migrants, the incentive to free ride also increases: each of them remits less and the total remittances could decrease. We use the last nationally representative survey to test our theoretical predictions. We find that the total remittances received (per household member) in fact substantially decreases with the number of migrants, in line with the free-riding argument. We use past conflict intensity in the district to predict current number of migrants and clear our estimates of endogeneity biases. We also discuss the plausibility of alternative explanations.

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Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number 8.

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Length: 25 pages
Date of creation: 2014
Handle: RePEc:chm:wpaper:wp2014-8
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  1. Oded Stark, 2009. "Reasons for Remitting," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(3), pages 147-158, July.
  2. Rosenzweig, Mark R, 1988. "Risk, Implicit Contracts and the Family in Rural Areas of Low-income Countries," Economic Journal, Royal Economic Society, vol. 98(393), pages 1148-1170, December.
  3. Stark, Oded & Levhari, David, 1982. "On Migration and Risk in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 31(1), pages 191-196, October.
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  5. Hillel Rapoport & Frederic Docquier, 1998. "Are migrant minorities strategically self-selected?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 11(4), pages 579-588.
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  7. Magnus Hatlebakk, 2010. "Maoist Control and Level of Civil Conflict in Nepal," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 11(1), pages 99-110, March.
  8. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  9. Funkhouser, Edward, 1995. "Remittances from International Migration: A Comparison of El Salvador and Nicaragua," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 137-146, February.
  10. Maëlys De La Rupelle & Deng Quheng & Li Shi & Thomas Vendryes, 2009. "Land rights insecurity and temporary migration in rural China," PSE Working Papers halshs-00575041, HAL.
  11. Magnus Hatlebakk, 2007. "LSMS Data Quality in Maoist Influenced Areas of Nepal," CMI Working Papers 6, CMI (Chr. Michelsen Institute), Bergen, Norway.
  12. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211.
  13. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
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