Macroeconomic determinants of labor migration: An empirical analysis for Nepal

Abstract

This paper aims to examine the relationship among selected macroeconomic variables—unemployment rate, remittance, foreign direct investment, exchange rate, and labor migration in Nepal—using the time series data spanning the period 1994-2024, based on the Autoregressive Distributed Lag (ARDL) framework. The bounds test indicates a cointegrated long-run association between labor migration and its macroeconomic factors. The study finds that remittances and foreign direct investment are key determinants of labor migration in both the short and long run. Labor migration is negatively associated with unemployment and positively associated with the exchange rate in the long run, though neither relationship is statistically significant. In the short run, both factors have a significant negative effect on labor migration. These findings suggest that the government should introduce programs for reintegrating returning migrants, attract FDI, and create employment opportunities to regulate labor migration.