How Do Remittances Affect Human Capital Formation of School-Age Boys and Girls?

We revisit the impact of remittances on educational attainment of school-age children in Nepal, paying particular attention to differences between girls and boys. A heightened interest in understanding the impact of remitting practices on a variety of economic variables has emerged as remittances to developing countries continue to rise. In Nepal, the World Bank reports that remittances amounted to 1. 2 billion (US dollars) in 2005, while GDP was 8. 2 billion and official development assistance totaled 425 million (World Bank 2007). We use the 1995/1996 Nepal Living Standards Survey (NLSS) to examine the impact of remittances on human capital investments for female and male children. If remittances do affect human capital positively, then not only will remittances affect long-run growth in Nepal, but the opportunities for women in Nepal should improve as the female population becomes more educated. The effect of remittances on human capital investment is unclear a priori. Increasing income through remittances may increase investment in children’s schooling by relaxing household budget and capital constraints. Conversely, household absenteeism pressures children to work in the home, reducing time for education. Our data provide an opportunity to separate the effect of household disruption from the income effect of remittances on the decision to invest in schooling. We are able to measure the number of adults living outside the household so that we may control for absenteeism in estimating the impact of remittances on household schooling choices. We ask if the impact varies by gender and age group (young child versus older child). Our results indicate that young children benefit more from remittances, but the benefits, controlling How Do Remittances Affect Human Capital Formation of School-Age Boys and Girls?