Abstract/Summary

As the volume of the remittance inflow has increased remarkably in developing countries, it has attracted the interest of international organisations, academics, and policy makers. In this context, this study analyses the determinants of the receipt of remittances and its impact of on household expenditure and child welfare in Nepal using Nepal living standard survey (NLSSIII) data. It takes the receipt of remittances by households as the cause and their proportional expenditure on different bundles of goods, services (food, housing, consumer goods and durables, education, health and others) and child welfare as an outcome. This study divides the Nepalese households into two groups: one that does not receive any remittances is the control group, and the other receiving remittances from within the country or abroad is the treated group. To estimate the impact of remittances, the treatment effect model calculates potential outcome means (POMs) in the population. The difference between the two means is the average effect of the remittance. The study finds that the variables rural/urban region, ecological zone, family size, gender and education of head, the number of children, poverty of households, and migration network have a significant effect on the receipt of remittances. Although the probability of the receiving remittance is higher in rural households, they have received significantly less amount of remittances than the urban households. This study finds that households’ expenditure behaviour on food, consumer goods, health, and other bundles has not changed by the receipt of remittances in Nepal. However, there is an increase in the budget share of education and a decrease in the housing expenditure. It is highly likely that malnutrition in Nepalese children increases with the increase in their age. The research findings reveal that the receipt of remittances is helpful in reducing child malnutrition. The receipt of remittances does not increase the educational expenditure of school going children, and there is no difference in educational expenses between boys and girls. Finally, the study does not find any evidence to support that receipt of remittances increases conspicuous consumption of households as proposed by the findings of Chami et al. (2003). Instead, the research findings support the view that Nepalese households invest more in the education with the receipt of remittances. This higher investment may have been caused by the altruism towards the family members or by a knowledge gain.