RETURN LABOR MIGRATION AND ENTREPRENEURSHIP: A CASE STUDY OF NEPAL

Abstract

Every year one in four international labor migrants return home (Azose & Raftery, 2019). The New Economics of Labor Migration (NELM) identifies return migration as a strategic move not only by an individual migrant but also for their mutually interdependent family (Stark & Bloom, 1985; Stark, 1991). ApplyingApplying the theoretical framework of NELM, this dissertations research evaluated whether returning labor migrants are more likely to be entrepreneurs (employers plus self-employed or own-account workers) than people who do not migrate. Using a secondary dataset from the Nepal Labor Force Survey of 2018 (70,000 observations), the research employed a wide range of econometric models using instrumental variables to conclude that labor migration and return increase the probability that these migrants become entrepreneurs. Unlike what is commonly found in the literature for all migrants in other countries, there is evidence of negative selection between returning labor migration and entrepreneurship, i.e., returning labor migrants are less likely to be productive compared to those who do not migrate. After controlling for this selection bias, the preferred instrumental variable estimates suggest that returning labor migrants are more likely to be self-employed than wage employed.