POLICY SETTING, GOALS, AND ECONOMIC OUTCOMES 9
hectares of land. However, households with access to more than 2.0 hectares of land had poverty headcount decreases of 39 percent over the same time period.
Decreases in the poverty rates were accompanied by real increases in remittance receipts and nonagricultural wage income in both rural and urban areas. Between 1995 and 2003, migrant remittances increased by a massive 290 percent in urban areas and 139 percent in rural areas (Table 2.6). Non- agricultural wage income also increased in real terms, by 48 percent in urban areas and 57 percent in rural areas. In urban areas, housing income also in- creased by 60 percent. In striking contrast to increases in remittances and nonagricultural wage income, agricultural wage income declined over the same time period. Urban areas saw declines of 20 percent in agricultural wage income, while rural areas exhibited a 13 percent decline. Table 2.6 lists the average daily wages in the two periods. The table illustrates that in urban areas the wages of skilled workers significantly increased, while unskilled laborers saw their wages decreasing. This was perhaps due to the massive migration of unskilled laborers from rural areas to cities as a result of domes- tic conflict.
These descriptive statistics suggest that although poverty has been de- creasing in Nepal, these changes have not been driven primarily by increases in agricultural income or by agricultural sector growth. Migration has intensi- fied over the past decade, and this has been related to the Maoist conflict. With more people leaving the rural areas, a decreasing share of wage employ- ment and a rising share of self-employment in agriculture have been observed. However, the agricultural sector has had a mediocre performance. Given that most people still live in rural areas and rely on agriculture as the major source of their livelihood, it is important to determine appropriate sets of rural public investments to boost agricultural growth and reverse the trend of declining farming profit. Although poverty reduction has been impressive in Nepal since 1996, this reduction in poverty has not been driven by the agri- cultural sector as outlined in the Ninth Five-Year Plan. In the following chap- ters we review the allocation of public resources to the agricultural sector for investments in agriculture, rural roads, and irrigation technology. Then we estimate the impact of access to different types of infrastructure and services to provide recommendations as to the most efficient policy choices to offset rural poverty.
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