Economic theory suggests that schooling decisions are motivated by returns to education and opportunity cost. In a rapidly changing economic context, changes in returns to education can significantly influence schooling decisions. Migrating to the resource-abundant Gulf countries in short-term contracts represent an additional, and often the most lucrative, labor market option for many young individuals in South Asian developing countries. However, most of these jobs do not tend to demand high education qualifications. This paper studies whether access to low-skilled jobs in construction and service sector led to a reduction in schooling investment. Utilizing the Nepal Census data and instrumental variables method to account for endogeneity of migration, I estimate the impact of migration boom by comparing average education across cohorts and across areas with different rates of migration, The study finds that increase in low-skilled migration possibilities reduced educational investment in Nepal by 3%. Given the importance of human capital accumulation in long-term development, providing additional incentives to keep individuals longer in school would help maximize the benefits from migration.
Shrestha, Rashesh. "Labor market changes and human capital investment: Evidence from migration boom in Nepal." (2015). https://digitalrepository.unm.edu/nsc_research/67