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This paper examines the effect of remittances on household expenditure patterns applying propensity score matching methods that allow designing and analyzing observational data and enable reducing selection bias. We use data from the Nepal Living Standards Survey 2010/2011. In general, remittance recipient households tend to spend more on consumption, health and education as compared to remittance non-receiving households. Although the findings do not clearly provide evidence of either the productive or non-productive use of remittances, expenditures on non-food investment categories, such as durable goods, health and education, are more apparent among remittance-receiving households compared to remittance non-receiving households, which signal the prospect of a sustainable long-term welfare gain among the former.

Remittances and Household Expenditure in Nepal: Evidence from Cross-Section Data