This paper analyses the effect of remittance income on the hours of work in remittance-receiving households using panel data from Nepal Living Standard Surveys (NLSS). This study applies a number of econometric models to explain the impact of remittance income on the hours of work in
different sectors (e.g., farm, self-employment, off-farm and hired labour) taking into account various methodological issues (endogeneity and selection bias) for migration decision and remittances. This paper first uses a Zero Inflated Poisson model to examine the factors motivating
migration, and then applies random effects and instrumental variable Tobit models for estimating the impact of remittances on the household work hours both for different sectors and separately for working age men and women. Evidence shows that rural people with larger family size and higher per capita income without remittances have higher probability to go migration out. Remittances decrease work hours in a number sectors, but increase work hours of hired labour. Remittance income seems to a substitute of non-labour income. No significant effects on off-farm and self-employment activities were observed in the sample households. In contrast, non-labour income appears to be positive with work hours of household members. Moreover, demographic characteristics seem to be influential for the allocation of household work hours, implying that higher family size leads to higher work hours, and a larger number of children (<6 years) leads to a reduction of work hours of females and but not for males. Educated people are also more likely to increase their work hours