Impact of Civil war on the Socio-economic Dynamics of Nepal’s Urban-Rural Divide

This paper tries to analyze the impact of civil war on the urban-rural divide and also examine how the divide has changed across time. With the help of timely convenient secondary data this study aims combine these two areas of development economics, adding to small portion of literature that looks at impact of civil war on inequality. Using a within country approach, this paper examines the situation of urban-rural divide across districts in affected at varying levels of conflict intensity. By applying an Oaxaca Blinder decomposition on socio-economic indicators across time periods, this paper attempts to analyze the contribution of urban-rural gap in districts, at different conflict intensity levels on the overall gap. In addition, it investigates the association between remittances and socio-economic welfare indicators as a result of civil war. The results suggest that civil war played a significant role in closing in the urban-rural divide in terms of household expenditure in areas immensely affected by the war. But, the is a long way to go before the urban-rural divide in asset holdings decrease unless effective policies for land reforms are implemented to balance out the gap. The results also reiterate the importance of remittances during civil war or conflict.