Abstract

This study investigates the impact of remittances on farm productivity in the aftermath of the 2015 Nepal earthquake, addressing a critical gap in our understanding of how private financial flows affect economic outcomes during times of crisis. Employing a triple difference strategy and using exchange rates as an instrument for remittances, we find that a 10% increase in remittances leads to a 1.5% decrease in farm productivity for earthquake-affected households. This effect is pronounced in the short term but dissipates by the third year post-earthquake. Our analysis reveals that remittance-receiving households prioritize immediate recovery needs over agricultural investments, suggesting a trade-off between short-term disaster relief and maintaining productivity in key economic sectors. The study utilizes comprehensive household survey data, and rigorous econometric techniques to establish causality. Our findings have important implications for policymakers in remittance-dependent countries prone to natural disasters, highlighting the need for integrated approaches that leverage remittances for immediate relief while supporting agricultural productivity.