ABSTRACT
This chapter provides a political economy analysis of the roots of economic underdevelopment and its relationship with large-scale outmigration from the hills. The analysis is conducted within an institutional framework, encompassing both internal and external forces. With regard to internal forces, the focus is on the institutional policies of the successive regimes, both the Prithivi Narayan Shah and Jang Bahadur Rana rulers, that were responsible for initiating economic underdevelopment and later hill outmigration. The evolution of the agrarian social formation had far-reaching impacts on Nepal's labor process and land development in the early phases of its economic growth. The chapter deals with the roots of economic underdevelopment in relation to the institutional polices of the successive regimes with respect to labor service, land control, and industrial development. The process of external migration from the hills is analyzed in the third section in connection with both the internal state policies and external British Gorkha recruitment.
