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" Internal versus External Remittances and Household Education Expenditures in Nepal " by Bansak, Chezum


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Title: " Internal versus External Remittances and Household Education Expenditures in Nepal " by Bansak, Chezum

" Internal versus External Remittances and
Household Education Expenditures in Nepal " by
Bansak, Chezum Giri
  • Development Workshop
  • 07.12.2010
  • Emiko Nishi Aleksandra Olszewska

  • Context
  • Aim Theory
  • Spending Patterns
  • Methodology
  • Results
  • Potential Causes of the Results
  • - Migration Patterns (Gurung, 2008)
  • - Incentives to Invest on Education
  • Concluding Remarks Discussion

Remittances in Nepal
Remittances in Nepal
Remittances in Nepal
Remittances in Nepal
  • remittances 1.2 billion (US dollars)
  • GDP 7.4 billion
  • development assistance aid 425 million
  • Remittances development
  • Remittances gtgt relaxation of the budget
    constraint gtgt increased consumption gtgt no lasting
    impact on development
  • Remittances gtgt investment, asset accumulation gtgt
    vehicle for development

  • How do remittances affect household expenditures
    on human capital?
  • How may this impact differ based on the origin of
  • internal (originating within the country)
  • external (originating outside the country)

In theory
  • Remittances can have 2 opposing effects on
  • higher income gtgt relaxed household budget gtgt
    increased opportunity to invest in children's
  • absenteeism in the household gtgt pressure on
    children to work as a substitute for the absent
    member gtgt reduced time available for education

Migration spending patterns
  • Migration occurs if benefits gt costs
  • Expect higher costs but also benefits of external
  • Why would the spending patterns differ between
    internal and external remittances?
  • "If migrants return not only remittances but
    knowledge of new markets and/or technologies one
    may reasonably expect changes in spending
    patterns relative to non-migrants
  • domestic migration as a less effective
    diversification mechanism (national economic
    shocks will affect both the household and the
    remitter in the same way)
  • Therefore internal remmittances gtgt less
    diversification gtgt choice of lower risk
    investment (e.g. education)

  • Specification
  • level of household expenditure on education fn
    (household remittances, migration outcomes,vector
    of household characteristics that control for
    family structure, productivity, and other income
  • 3 groups of households receiving internal
    remittances, receiving external remittances and
    receiving no remittances

  • I - internal migration
  • E external migration
  • D - indicator variables 1 if the household
    receives a remittance
  • Z - level of internal and external remittance
  • X - other household characteristics
  • Note Households receiving no remittances will
    have a zero on all occurrences of the indicator

Specification cont.
  • Marginal impact of an additional rupee of
    remittance income on household human capital
    investments ß3 ß4
  • Least squares estimates of the impact of
    remittances may be biased as the decision to live
    outside the household and send remittances is
    determined by the probability of household
    members attending school gtgt use instrumental
    variables to address endogeneity

Raw data
  • Tests of difference in means for subsamples

Raw data cont.
  • Tests of difference in means for subsamples

Specification - IVs
  • Migration as a joint household decision gtgt need
  • Migration networks (no of migrants from the
  • Costliness of travel (district road density)
  • Crop volatility (district level output of
    specific agricultural products between 1997-2002)
  • Past income volatility (past fluctuations in crop

  • OLS
  • low levels of remittances gtgt lower spending on
  • BUT at the margin an increase in remittances
    leads to increased spending on human capital.
  • The point at which the remittance income offsets
    the initially lower spending is roughly 65,000
  • IV
  • The same as for OLS
  • The turning point is 33,400 rupees.
  • Remittance income has a larger impact on
    education than other income sources.

Results cont.
  • estimates of the differential impact of internal
    and external remittances on education expenditures

Remittances exam results
  • Compare internal-/external- heavy districts and
    their results in school leaving exams (SLC)
  • loose correspondence
  • Better performance on the SLC exams - heavier
    concentration of internal remittances
  • Poor performance on the SLC exams - heavier
    concentration of external remittances

Migration from Rural Nepal A Social Exclusion
Framework (Gurung,2008)
  • who migrate where and why?
  • a social exclusion based on i) economic assets,
    ii) literacy, iii) identity.
  • gtgt how do these factors affect migration
  • migration patterns may help us understand the
    remittance-education expenditure relationship in
    Nepal better

(No Transcript)
Overview Social Conflicts in Nepal
  • The caste system
  • (i.e. while the caste system has been abolished
    under the constitution there is still
    discrimination and prejudice against Dalits).
  • Gender discrimination
  • Religion
  • (i.e. non-Hindu especially Janajatis are
    discriminated against).
  • Location
  • Language barrier
  • (i.e. while there are 125 different languages or
    dialects, non-Nepali language groups are socially

Caste Discrimination
Regional Gap
Migration from Rural Nepal A Social Exclusion
Framework (Gurung, 2008)
  • Data The Nepal Living Standard Survey 2003/4
  • Sample household who received remittances for
    the past 12 mths
  • Model a probit analysis to observe the
    likelihood of migrating destination (to
    rural/urban Nepal, India, or other countries)
    based on household characteristics such as
    economic resources, literacy, and cultural
  • The four destinations differ in terms of
    distance, costs, risk, opportunities, and the
    status of the migrants.

Migration from Rural Nepal A Social Exclusion
Framework (Gurung, 2008)
  • Richer households are more prone to send migrants
    and their choice of destination is preferably
    urban Nepal and other countries.
  • Poor households also send migrants but their
    preferred choice of destination is either rural
    Nepal or India.
  • Illiterate people migrate more than the literate,
    but for unskilled labor.
  • Socially excluded groups (Janajatis) are more
    likely to move to Middle-East, Malaysia and
  • gtgt the impact of internal remittance on education
    gt external
  • gtgt education expenditures (no remittance)gt (with

Issues Incentives to Invest on Education in
  • Decision-making on education may differ in Nepal
  • (i.e. individual variables are not driving force
    of educational attainment).
  • Productive job opportunities are limited very
    high unemployment and underemployment rates of
    17.4 and 32.3 (NPC, 2003).
  • (i.e. the education-productivity gain-future
    income relationship is not automatic)

(No Transcript)
Issues Incentives to Invest (Contd)
  • Returns to education are influenced by their
  • (i.e. to certain extent, each caste is still
    restricted to one kind of work)
  • Poor education system and lack of teachers
  • efforts associated with schooling may be
    considerably high for certain groups of people
    (e.g. language barrier)
  • child labor may be a choice of human capital
    investment over education
  • migrationgtgtremittancesgtgtrelaxed household
    budgetgtgteducation expenditures(?)

Remarks Discussion
  • the importance of identity on human capital
    investment to certain extent, similar with the
    Hukou policy in China
  • gtgt yet, identity seems to have a deeper
    connotation in Nepal
  • Policy may be abolished one day. But it takes
    time to change beliefs and customs.
  • Under the given condition, how can Nepal overcome
    an issue such as poverty?
  • Is education still an effective form of

  • Gurung, Y. B (2008) Migration from Rural Nepal.
    A Social Exclusion Framework. Tribhuvan
    University, Kathmandu.
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