The spatial division of labour in Nepal

This article examines how economic activity and market participation are distributed across space. Applying a nonparametric von Thünen model to Nepalese data, we uncover a strong spatial division of labour. Non-farm employment is concentrated in and around cities while agricultural wage employment dominates villages located further away. Vegetables are produced near urban centres; paddy and commercial crops are more important at intermediate distances. Isolated villages revert to self-subsistence. Findings are consistent with the von Thünen model of concentric specialisation, corrected to account for city size. Spatial division of labour is closely related to factor endowments and household characteristics, especially at the local level.