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20015
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
particular household but also to set or inform the choice of poverty lines, equivalence scales,
economies of scale, and regional cost-of-living differences. It can also be useful to compare
subjective and self-reported measures of well-being to objective measures based on observed
income and consumption data. Self-reported measures have important limitations, however.
Subjective measures might reproduce existing discrimination or exclusion patterns if these patterns
are perceived as normal in the society. This might be the case in discrimination against girls or
other particular groups in society. Subjective assessments could then fail to capture discrimination,
which should be addressed by public policy. More generally, the observed perceptions of
poverty need not provide a good basis to establish priority public actions. This may be the case if
policymakers have a different time horizon or a different understanding of the determinants of
social welfare from the population providing the subjective measures of poverty.
Methods of Setting Absolute Poverty Lines
Different methods have been used in the literature to define absolute poverty lines (see Deaton
1997; Ravallion and Bidani 1994; Ravallion 1994; and Wodon 1997a). The choice of method
can greatly affect poverty measures and who is considered poor. It is important to derive poverty
lines that provide consistency in welfare measurement in space and time: two people with the
same real consumption should be considered either poor or nonpoor. As discussed in Ravallion and
Bidani (1994) and Wodon (1997a), the food-energy intake method defines the poverty line by
finding the consumption expenditures or income level at which a persons typical food energy
intake is just sufficient to meet a predetermined food-energy requirement. If applied to different
regions within the same country, the underlying food consumption pattern of the population group
consuming only the necessary nutrient amounts will vary. This method can thus yield differentials in
poverty lines in excess of the cost-of-living differential facing the poor. An alternative is the cost
of basic needs method, where an explicit bundle of foods typically consumed by the poor is first
valued at local prices. Ordinal ranking of welfare crucial for the poverty profile is more
important than cardinal ranking, with one household above and another below the line. For
comparisons over time, however, the stability and consistency of the poverty line need to be
ensured.
The linkage (nexus) of production relation of poverty:
Production is conducted within a network of discursive and non discursive relations technical, social,
ecological cultural, political and academic whose understanding is distorted by subject specific
views of reductionist science.
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
BIOGENIC DIET
Technical
HEALTH CARE
Ecological
Cultural
Social
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
[policies within an organization that break the law], Data corruption, [change to data in
storage], Putrefaction [decomposition]).
Political corruption, as the dysfunction of a political system or institution in which
government officials, political officials or employees seek illegitimate personal gain
through actions such as bribery, extortion, cronyism, nepotism, patronage, graft, and
embezzlement.
Basic environmental pollution: such as urban air pollution, media pollution, private
information talent management regulation or brain management, innovation and technical
change. Theoretical economic incentives are assumed to promote more innovation and cost
reductions in pollution control, relative command and control. The magnitude of this effect
is an empirical question.
Corrupted forget moral principle and is a evil, malignance, sickness, of the economy which loss of
innocence or purity.
The "Missed the Boat" view: This view accepts the argument of the "Join the Club" views that, the
market failure argument: In efficiency or absence of well organized commodity. Factor and
capital markets is said to reduce considerably the ability to economic system to function
effectively without some form of external interference.
Commodity and factor markets are poorly organized
Absence of well organized commodity
Producers and consumers lack of necessary information; to act in a way conducive to
efficient production and distribution
Poorly developed in financial institutions
The market is too said lead to a misallocation of present and future resources
The resource mobilization and allocation argument: investment project must be chosen not
only on the basis of a partial productivity analysis dictated by individual industrial output
ratios, but rather in the context of external economies, indirect repercussions and long term
objectives.
The third world economies cannot afford to waste their limited financial and skilled
manpower resources on unproductive ventures.
Change their original religion: Hindu to christen.
Utilization of unskilled manpower.
It is argued that competitive markets will tend to generate in to socially low priority areas
and to disregard the extra benefits to be derived from a planned and co-coordinated
long term investment program.
The "Geographic Disadvantage" view: This view accepts the arguments of land lock country,
Very large in geographical and populated neighbors China and India and an opposite ideology.
Planning and program can not complete timely because of so many lame excuses.
Planning in Nepal has little to do with anything that happens in that country. Planned targets are
not met. Planned expenditures are not made. insufficient information, few and poor project
proposals, inability to program foreign aid, opposition of the finance ministry, and severely
limited capacity to administer development-given for the failure of planning. Special attention is
4|Page
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
paid to the tortuous release of funds and the effort to overcome basic political and administrative
factors through surface changes in the form of organization for planning.
Definition and Measurement of Poverty
The World Banks 2000 World Development Report defines poverty as an unacceptable
deprivation in human wellbeing that can comprise both physiological and social deprivation.
Physiological deprivation involves the non fulfillment of basic material or biological needs,
including inadequate nutrition, health, education, and shelter. A person can be considered poor if
he or she is unable to secure the goods and services to meet these basic material needs. The
concept of physiological deprivation is thus closely related to, but can extend beyond, low
monetary income and consumption levels. Social deprivation widens the concept of deprivation to
include risk, vulnerability, lack of autonomy, powerlessness, and lack of self-respect. Given that
different definitions of deprivation often go beyond physiological deprivation and sometimes
give greater weight to social deprivation, local populations (including poor communities) should be
engaged in the dialogue that leads to the most appropriate definition of poverty in a country.
George stated: The poverty to which in advancing civilization great masses of men are
condemned ... is a degrading and imbruting slavery, that cramps the higher nature, dulls the finer
feelings, and drives men by its pain to acts which the brutes would refuse.
Marshall stated: We scarcely realize how subtle, all-pervading and powerful may be the effect
of the work of man's body in dwarfing the growth of the man . . . the poor laborer may live and
die without even realizing what a joy there is in knowledge, or what delight in art; he may never
have conceived how glorious a thing it is to be able to think and to feel about things and with
many men. [Henry George, (1898) the Science of Political Economy, p. 125. 3. Henry George,
(1879) Progress and Poverty, pp. 298-99.]
Poverty in Nepal
Poverty in Nepal is a deeply entrenched and complex phenomenon. About 30.9 percent (World
Development Report 2008) of Nepalese live below the poverty line of US$12 per person/per
month. Despite some progress in poverty reduction in recent years and declining rates of urban
poverty, the problem remains widespread and most indicators suggest that it is on the rise.
About four fifths of the working population live in rural areas and depend on subsistence farming
for their livelihoods. In these areas household food security and poor nutrition are still major
concerns. Most households have little or no access to primary health care, education, clean
drinking water and sanitation services. Rural poor people are generally illiterate, have large
families, and are landless or have very small landholdings. Small, fragmented subsistence farming
is a characteristic of Nepalese agriculture, and the average landholding is only 0.8 hectares. Life
is a constant struggle for survival. The most vulnerable groups are the lowest social castes,
indigenous peoples and women.
Rural poor people in Nepal include:
5|Page
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
Destitute people, such as sick or disabled persons, abandoned children and displaced
persons
Extremely poor people, including illiterate or landless persons or those with very few
assets
Moderately poor people, such as those who have small farms but are often heavily
indebted
People who are nearly poor, including small farmers who are at risk of slipping deeper
into poverty as a
result of factors such as conflict, debt and land degradation.
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
consumption. Second, higher initial inequality may result in lower subsequent growth and,
therefore, in less poverty reduction. The negative impact of inequality on growth may result from
various factors. For example, access to credit and other resources may be concentrated in the
hands of privileged groups, thereby preventing the poor from investing. Third, higher levels of
inequality may reduce the benefits of growth for the poor because a higher initial inequality may
lower the share of the poors benefits from growth. At the extreme, if a single person has all the
resources, then whatever the rate of growth, poverty will never be reduced through growth.
We argue that, independent of inequalitys impact on poverty, inequality has a direct, negative
impact on social welfare. According to the theory of relative deprivation, individuals and
households do not assess their levels of welfare in terms of their absolute levels of consumption or
income only. Individuals also compare themselves with others. Therefore, for any given level of
income in a country, high inequality has a direct, negative effect on welfare. There are good
reasons to be interested in inequality and social welfare from the perspective of a comprehensive
evaluation of public policies and social programs that go beyond their impact on poverty.
Inequality in health: High rate of infant mortality, High impact health services, mortality,
morbidity
Inequality in education: Test results, male and female household heads, rural and urban
households, access to teachers, and quality of education.
Economic inequalities: Nepal Gini coefficient of 1996 was 0.366 consumption and 0.513
incomes, 24. 1% Population living below 1$ per day, and 68.5 % Population living below
2 $per day. 4% populations are sharing more than 80% of national income and output.
Inequality of power: top down approach for policy making, project selecting
Inequality trap for women: Fewer opportunities in health, education, economic welfare,
political power which also known gender inequality.
Inequality in the home: physical violence, sexual violence, tradition violence, household
decision.
Inequality of human capacities: Appointment in PEOs cronyism rather than competition.
Inequality of justices: Combating elite capture and discrimination.
24.7
21.5
2.2
9.6
44.0
240.0
37.7
82.5
42.0
44.0
240.0
24.1
68.5
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
30.9
7.6
34.6
90 80 -
% of income
70 Line of equality
60 50 40 -
(25.2)2003/04
30 -
(20.9)1995/96
20 10 0
10
20
30
40
50
60
70
80
+
90
+
100
% of income recipients
Unemployment
Unemployment is the state in which a person is without work, available to work, and is currently
seeking work. The rate is determined as the percentage of those in the labor force without jobs.
There are a variety of different types of unemployment, depending on the cause, and
disagreement on which is most severe. Different economic theories suggest different measures to
limit it and on its importance; Monetarism, for example, thinks that controlling inflation to facilitate
growth and investment is more important, and will lead to increased employment. There is
disagreement on how to measure unemployment. Different countries experience different levels of
unemployment; the Nepal currently experiences higher unemployment levels than the other
9|Page
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
countries and it also changes over time throughout economic cycles. If the market for goods is a
buyers' market, Keynesian unemployment may ensue while a limiting production capacity is more
consistent with classical unemployment.
Surroundings of unemployment in Nepal
Frictional unemployment occurs when a worker moves from one job to another: imperfect
information in the labor market.
Classical unemployment: Classical or real-wage unemployment occurs when real wages
for a job are set above the market-clearing level. This is often ascribed to government
intervention, as with the minimum wage, Structural unemployment.
Structural unemployment: is caused by a mismatch between jobs offered by employers
and potential workers. This may pertain to geographical location, skills, and many other
factors.
If such a mismatch exists, frictional unemployment is likely to be more significant as well.
Seasonal unemployment: occurs when an occupation is not in demand at certain seasons.
Keynesian (Seasonal) unemployment: Cyclical or Keynesian unemployment, also known as
demand deficient unemployment, occurs when there is not enough aggregate demand for
the labor. This is caused by a business cycle recession and wages not falling to meet the
equilibrium rate.
Causes of unemployment
Costs of unemployment
Unemployed individuals are unable to earn money to meet financial obligations. Failure to pay
mortgage payments or to pay rent may lead to homelessness through foreclosure or eviction.
Unemployment increases susceptibility to malnutrition, illness, mental stress, and loss of self-esteem,
leading to depression.
Dr. M. Harvey Brenner conducted a study in 1979 on the "Influence of the Social Environment on
Psychology." Brenner found that for every 10% increase in the number of unemployed there is a
1.2% in total mortality, a 1.7% increase in cardiovascular disease, 1.3% more cirrhosis cases,
1.7% more suicides, 0.4% more arrests, and 0.8% more assaults reported to the police.
10 | P a g e
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
Another cost for the unemployed is that the combination of unemployment, lack of financial
resources, and social responsibilities may push unemployed workers to take jobs that do not fit
their skills or allow them to use their talents. Unemployment can cause underemployment.
Society: During a long period of unemployment, workers can lose their skills, causing a loss of
human capital. Being unemployed can also reduce the life expectancy of workers by about 7
years. High unemployment can encourage xenophobia and protectionism as workers fear that
foreigners are stealing their jobs. Rising unemployment rate concentrates the oligopsony power of
employers by increasing competition amongst workers for scarce employment opportunities.
Table 2: Unemployment rate of Nepal: 42% (2004 estimated
Year Unemployment rate
Rank
Percent Change
2003
47.00 %
9
2004
47.00 %
10
0.00 %
2005
47.00 %
183
0.00 %
2006
42.00 %
189
-10.64 %
2007
42.00 %
186
0.00 %
2008
42.00 %
184
0.00 %
Source: WDR
Date of Information
2001 estimated
2001 estimated
2001 estimated
2004 estimated
2004 estimated
2004 estimated
Dependent population (age of 0 to 14 and 60 above): Dependency ratio is the ratio of total
population in 0-14 and 60+ age groups to total population in 15-59 age group. The
percentage of economic active population is 52.8 and economic inactive population is 47.2
percentages.
Table 3: Distribution of population by broad age groups and dependency ratio, Nepal
((Percent)
00 - 14
15-59 years
60 years and
Tot
Dependency Ratio
years Male Female older
al Census
NLSS II
s
s
2001
Development
Region East
37.6
24.7
29.8
7.8
100 81.7
83.3
Central
39.9
24.8
27.8
7.4
100 79.7
89.9
West
39.2
21.7
30.0
9.1
100 90.9
93.2
Mid West
41.2
24.2
28.7
6.0
89.3
89.2
Far West
43.1
21.9
29.0
6.0
100 93.2
6.5
Ecological Zone
100
Mountains
39.9
23.6
27.9
8.7
89.8
94.4
Hills
38.4
23.5
29.4
8.7
100 84.7
89.1
Tarai
40.6
24.3
28.7
6.4
100 84.1
88.7
Urban/Rural
100
Urban
30.0
30.2
31.2
8.5
63.3
62.7
Rural
41.3
22.8
28.5
7.4
100 88.8
94.9
100
11 | P a g e
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
Nepal
CBS, Nepal 2004
89.2
39.6
23.9
28.9
7.6
100
84.7
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
Academic relation of poverty where subject, object and thesis (discourses) are mutually
constituted
OBJECT
SUBJECT
THESIS
ACADEMIC
T
C
S
FERTILIZER
Water
CHEMICAL
Seeds
Organic
Pesticides
..
Machinery
..
..
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
total satisfaction. National income is merely a measure of the annual volume of goods and
services produced. Many things could make a country better off without necessary raising
National income, such as reduction of crime and violence, greater equality of opportunity,
improved racial harmony, better understanding between parents and children and reductions of
drug, sex and alcohol abuse, tax abuse.
Nevertheless it is widely held that there should be a strong positive correlation between real
National income and economic well-being; that is greater production should move society
towards the good life. Thus we must understand some of the shortcomings of National income
why it might understate or overstate real output, and why more output will not necessarily make
society better off.
Government can play promotional roles for economic development in Nepalese economy
through:
1. External and internal macroeconomic checks: Reset the trade and development policy,
proper utilize the foreign aid and foreign investment, harmonized with private sector
as a partner of development, correction of balance of payments, correct monetary
policy and fiscal policy, choose the reasonable development and planning theory, set
the priority and objectives of the planning.
2. Adjustment macroeconomic disequilibrium: Mobilize the unemployed labor force,
control rural urban migration, invest in human capital, improve health nutrition and
education for the poor, provide subsidy for deprive group, control the corruption,
develop the financial institution, reduce economic inequalities and redistribute of
national income and output, formulate bottom up approach for policy making, project
selection, more opportunities in health, education, economic welfare, political power
which also known gender inequality, control physical violence, sexual violence,
tradition violence, household decision, appoint in PEOs with a higher competition ,
provide equal of justices, stop combating elite capture and discrimination.
3. Stimulate needed social and economic changes rather than political shocks: The most
important is the political commitments, providing essential social services to all rural
people, decentralized rural planning, generating rural and urban capital formation,
diversify the rural economic activities.
14 | P a g e
Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
40 Y
-
(25.2)2003/04
50 30 20 10 -
X1 +
t-2
+
t-1
t0
t+1
t+2
-10 -
+
t+3
t+4
t+5
t+n
Time Line
-20 -30 Y1
References
Central Bureau of Statistics. 1996. Nepal Living Standards Survey Report 1996: Main Findings,
Volume One. Kathmandu, Nepal.
Central Bureau of Statistics. 1996. Nepal Living Standards Survey Report 1996: Main Findings,
Volume Two. Kathmandu, Nepal.
Central Bureau of Statistics with UNFPA. 2002. Population Census 2001: National Report.
Kathmandu, Nepal.
Central Bureau of Statistics. 2003. Population Monograph of Nepal, Volume One. Kathmandu,
Nepal.
Central Bureau of Statistics. 2003. Population Monograph of Nepal, Volume Two. Kathmandu,
Nepal.
Central Bureau of Statistics (Nepal) with UNICEF. 2001. Reports on the Situation of Women,
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Central Bureau of Statistics. 2004. National Sample Census of Agriculture Nepal 2001/02.
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Demographic
Health Survey 2001. Kathmandu, Nepal.
World Bank. 1980. World Development Report 1980. New York: Oxford University Press.
World Bank. 1990. World Development Report 1990: Poverty. New York: Oxford University
Press.
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Economics of Nepal: Class note on Poverty Alleviation and Employment (Eco: 539: MA 2nd year) Chakra Khadka,
Department of Economics, Patan Multiple Campus.
20015
World Bank. 1993. World Bank Policy Research Report 1993. The East Asian Miracle: Economic
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