will happen when the migration out-flow stops and the migrants start returning back to their origin communities. In a study of large-scale migration of male workers from Malawi to the gold mines in South Africa, Dinkelman, Kumchulesi, and Mariotti (2017) finds that higher remittance incomes lead to employment diversification away from low-productivity agriculture towards more productive non-farm service sector. Even decades after the migrants returned, they find communities with higher migration rates are wealthier, and have accumulated more non-farm physical capital and human capital.

A closely related question is how having a migrant in the household affects their labor force participation choices. Two studies have investigated this in the context of Nepal using broadly similar empirical strategies. Lokshin and Glinskaya (2009) uses the 2003/04 Nepal Living Standards Survey and instruments household migration status with 2001 migration rates in the village. The study finds that female labor force participation in wage-employment falls for households with a migrant. Phadera (2016) also uses the village level migration rates in 2001 as an instrument, but examines the impact at a later period using the 2010 Nepal Living Standards Survey. This study finds similar reduction in wage employment for women but finds an increase in participation in self-employment activities, particularly in agriculture. The results for men are also similar to those of women, but of slightly lower magnitude and estimated imprecisely. It is important to note that the results of these studies are not directly comparable to those of this paper. These studies compare labor market outcomes for individuals in households with a migrant to those without a migrant, whereas this paper compares participation of individuals in households with a migrant across villages with different overall migration rates.

This paper is organized as follows: Section 2 discusses the context of international migration from Nepal, Section 3 discusses the data and empirical strategy used in the paper, Section 4 discusses the results on poverty and consumption (4.1), education (4.2), and labor force participation (4.3), and Section 5 concludes.

# **2 Context**

International migration of workers from Nepal, to destinations other than India, is a relatively new phenomenon. Before 2001, almost all out-migration from Nepal was to India (Figure 1). Migration to other destination increased drastically when Nepal allowed private recruitment of workers to a set of countries in the late 1990s. Consequently, out-migration from Nepal increased from about 3 percent in 2001 to about 7 percent in 2011.

The increase in migration has been driven by the migration of primarily male, low-skilled migrants to Malaysia and the Persian Gulf countries. By 2011, almost a million Nepali workers worked in Gulf-Malaysia. The out-migration has continued to surge in recent years with the estimated stock of over 2 million Nepali workers by 2015 (Figure 2).<sup>2</sup> This has led to a massive surge

> 2The migrant outflow declined considerably in 2015 and 2016 owing to a recession in Saudi Arabia and lack of demand for Nepali workers from Malaysia. Consequently, the remittances, and the stock of migrants abroad are expected to decline in 2016 and subsequent years.

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