Heterogeneous effect of out-migration on informal employment in rural Nepal

This research examines the heterogeneous impact of out-migration on the informal employment within the framework of rural transformation in Nepal. Employing a multinomial Probit model with instrumental variables, we analyze the influence of household-level migration on the informal employment choices made by non-migrating household members. In the rural Nepalese context, subsistence farming predominantly characterizes informal employment, but a diverse range of informal employment options exists. This study differentiates between these distinct categories of informal employment and estimates the heterogeneous effect of out-migration on these various types of informal employment for the household members who remain in the home country. Through this research, we aim to contribute to a more comprehensive understanding of the nuanced dynamics of migration's impact on informal employment within the context of rural transformation in Nepal. Our findings reveal that out-migration significantly increases the likelihood of subsistence work and informal farm self-employment for both men and women left behind. Conversely, out-migration reduces the probability of informal non-farm wage employment, particularly for men. These results suggest that migration may reinforce less productive forms of informal employment in rural Nepal, highlighting the need for targeted policies to promote more productive economic activities and formal employment opportunities in migrant-sending communities.