Trade‐offs between labour migration and agricultural productivity: Evidence from smallholder wheat systems in Nepal

Abstract

Rural labour out‐migration has become a major contributor to off‐farm income through remittances and plays a crucial role in supporting the livelihoods of rural households in developing economies. However, research on the simultaneous on‐farm and off‐farm impacts of labour migration is still lacking. This study assesses the impacts of household labour migration on wheat productivity, labour and total costs, profitability and off‐farm income among smallholder wheat growers in Nepal. We use endogenous switching regression and two‐stage least squares regression models to control for potential endogeneity. The findings reveal that labour migration boosts off‐farm income due to remittances but negatively affects wheat productivity and profitability due to labour shortages. In addition, heterogeneous effects are observed, with large farms, cooperative membership, use of farm mechanization and non‐marginalized castes recording positive impacts. The study suggests that social institutions, such as cooperatives, and farm mechanization can create synergies between labour migration and agricultural productivity in Nepal.