Nepal made remarkable progress in poverty reduction
between 1995 and 2010, a period coinciding with
a decade-long violent conflict followed by tumultuous
post-conflict recovery. Although improving agricultural
productivity was long regarded as instrumental to lifting
the living conditions of Nepal’s impoverished rural areas,
a bulk of the observed poverty reduction has come as a
result of exogenous improvements in economic opportunities
for poor Nepalis outside Nepal’s borders. About 50
percent of the poverty reduction witnessed between 1995
and 2010 was associated with growth in labor incomes,
particularly in nonagricultural activities. Private remittance
receipts account for a little over a quarter of the total poverty
reduction seen in Nepal. This is consistent with increased
nonfarm diversification of rural households as well as the
increase in nonfarm wages over the period. Household
demographic changes, brought about by a sharp decline
in fertility rates and the changing dependency structure as
a result of migration, have also played an important role.