Remittances and Non-Farm Self-Employment Among the Left-Behind: evidence from Nepal

We estimated the impact of remittances from international migration on the labor supply of
left-behind household members to non-farm self-employment and on the performance of
the non-farm enterprises they operated. We used data from a nationally representative
household survey from Nepal that included an enterprise module. We accounted for both
the truncated nature of observed hours worked and the endogeneity of remittances when
assessing the impact on labor supply, and, in estimating the effects on firm performance, we
addressed selection into operating a non-farm enterprise as well as the endogeneity of
remittances. Remittances were found to encourage women to reduce their labor supply in
non-farm self-employment, whereas there was no significant effect on men. We found
evidence that the disincentive effect was strong enough to exert a negative influence on
the revenues of non-farm enterprises operated by the left-behind labor force