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Geographic Differentials in Multidimensional Poverty in Nepal: Rethinking Dimensions and Method of Computation

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Geographic Differentials in Multidimensional Poverty in Nepal: Rethinking Dimensions and Method of Computation Geographic Differentials in Multidimensional Poverty in Nepal: Rethinking Dimensions and Method of Computation First Author: Srinivas Goli Assistant Professor Center for the Study of Regional Development (CSRD) Jawaharlal Nehru University, New Delhi Email:[email protected]; Mobile: +91-7042181232. Second Author: [Corresponding Author] Nagendra Kumar Maurya Assistant Professor Department of Applied Economics University of Lucknow, Lucknow, Uttar Pradesh, INDIA Email:[email protected] Mobile: +91-9450138773 Third Author: Prem Bhandari Assistant Research Scientist Population Studies Center, Institute for Social Research University of Michigan 426 Thompson Street, Ann Arbor, MI 4810 Phone: 734-469-6349 Email: [email protected] Abstract: This paper examines the extent of geographic inequality in multidimensional poverty in Nepal using the nationally representative 2011 Nepal Demographic Health Survey data. We estimate a more robust method of multidimensional poverty index (MPI), particularly in terms of indicators, their definitions and aggregation procedure than those of the previous studies. The findings suggest that despite the relatively better economic progress and a considerable reduction in education and health poverty, there is a wide inequality across the geographic regions. While, a far less has been achieved in the case of reducing the standard of living poverty i.e. wealth poverty and inequalities across the regions. Thus, the paper suggests that development policies and poverty reduction programmes in Nepal must aim to reduce multidimensional poverty, of which deprivation in education, health and basic amenities must be an integral component, along with their efforts to improve economic growth and reduce income poverty. Keywords: Multidimensional Poverty, Nepal, MPI, DHS, Geographic Differentials. Geographic Differentials in Multidimensional Poverty in Nepal: Rethinking Dimensions and Method of Computation 1 Introduction During the last one decade, Nepal has gone through a major political transition. Abolition of monarchy, the establishment of a Federal Democratic Republic, and the election of Constituent Assembly in 2008 (and re-election in 2014) and adoption of the new constitution in September 2015 are the landmarks in the political history and economic planning of Nepal. The country is making every effort to move out of an extended political transition, also aiming to become a developed country in the world by 2022 (United Nations Nepal 2014). The ambitious journey of transition from a least developed country to a developing and then to a developed nation demands a concerted effort for a holistic approach to development. This is not possible without a significant reduction in the incidence of both absolute and relative multi-dimensional poverty in the country. Measurement of poverty itself is complex and highly debatable. Social scientists in different countries have adopted different dimensions to determine poverty status of the populations (see, Oxford Poverty & Human Development Initiative [OPHI] 2013; Yu 2013; Nowak and Schleicher 2014; World Bank 2014; Rangarajan and Dev 2015; Dutta 2015; Monotoya and Teixeria 2016; Reyles 2010; Rogan 2016; Wang and Wang 2016; Hanandita and Tampubolon 2016; Dhongde and Haveman 2016; Bader et al. 2016; Angulo et al. 2016; Guio et al. 2012; Guio et al. 2016). Nepal uses the concept of absolute poverty and has followed its own definition: according to which a person is earning less than 1 US$ a day is termed as poor. By this definition, the latest official figures suggest that more than 35% of the total population is living under the poverty line in Nepal. However, the application of the concept of relative poverty is virtually absent in Nepal (Central Bureau of Statistics [CBS] 2013; Alkire et al. 2013; Nepal Human Development Report [NHDR] 2014; Uematsu et al. 2016; World Bank 2016). Earlier to achieve Million Development Goals (MDGs) and now to achieve Sustainable Development Goals (SDGs), Nepal has been investing in social policies including poverty reduction and active society engagement (Government of Nepal 2011; Uematsu et al. 2016). This has resulted in a significant reduction in poverty (Uematsu et al. 2016). For instance, the percentage of multidimensional poor in Nepal has dropped significantly from 64.7 percent to 44.2 percent in between 2006 and 2011 i.e. by 4.1 percentage points per year (Alkire et al. 2013). In fact, the country has been able to reduce the national poverty much faster than its neighbouring countries such as India, Pakistan and Bangladesh (Dreze and Sen 2013). In spite of considerable progress in poverty reduction in the recent years, Nepal remains one of the poorest countries in the world. With a human development index of 0.548 in 2014, Nepal is ranked 145th out of 187 countries listed in the United Nations Development Programme - 2015 (UNDP 2015). The National Living Standards Survey (NLSS) conducted in 2010-2011 reported that more than 30 percent of Nepalese live on less than US$14 per person per month using the income-based poverty estimation. However, this figure rises to 44.2 percent in the case of multidimensional poor. Further, there is a large inequality in the prevalence of poverty within the nation. While the overall poverty rate for Nepal is 30 percent, this figure rises to 45 percent in the mid-western region and 46 percent in the far-western region (NLSS 2010-11).Thus, a national level figure often obscures the within- country inequality in poverty (Uematsu et al. 2016). 2 Background and Rationale Measuring poverty is a complicated process (Townsend 1954; 1971; 1979; Sen 1979). Early efforts of measuring poverty involved uni-dimensional indicators based on income or consumption expenditure (Bosanque 1903; Townsend 1954; 1971; 1979; Abel-Smith and Townsend 1965; Atkinson 1969; Sen 1976; 1981, 1987; 1989; Dominique 1979; Kakwani 1980; Clark et al. 1981; Atkinson 1987; Hagenaars 1987; Ravallion and Huppi 1991; Ravallion 1998). Later it was recognised that no single indicator alone could capture the multiple aspects of poverty (Townsend 1979; Foster et al. 1984). Poverty is much more than having a low income or low consumption expenditure (Townsend 1954; Sen 1970; Anand and Sen 1997; Bourguignon and Chakravarty 2003; Dreze and Deaton 2015). Realising the significance of multiple indicators, there have been some efforts to include multiple indicators in measuring poverty. The first multidimensional measure can be traced back to Townsend (1979), and the underpinnings of the Multidimensional Poverty Index (MPI) were set out by Foster et al. (1984). The Global Multidimensional Poverty Index (MPI) was designed in 2010 by the Oxford Poverty& Human Development Initiative (OPHI) and The United Nations Development Programme using different indicators to determine poverty beyond income-based measures (OPHI, 2013). This MPI replaced the previous Human Poverty Index in subsequent Human Development Reports of world countries. Following this, numerous studies in many countries have used various procedures to estimate multidimensional poverty of individuals and households(Tsui 2002; Guio et al. 2012; Yu 2013; World Bank 2014; Nowak and Schleicher 2014; Rangarajan and Dev 2015; Dutta 2015; Monotoya and Teixeria 2016; Rogan 2016; Wang and Wang 2016; Hanandita and Tampubolon 2016; Dhongde and Haveman 2016; Bader et al. 2016; Angulo et al. 2016; Guio et al. 2016). A majority of these studies used methods designed for global MPI calculations (Alkire and Foster 2007; Alkire et al. 2011b; Alkire and Santos 2013). Advancing the existing methodology of selection of parameters in multidimensional poverty, Guio et al. (2012) and Guio et al. (2016) proposed an analytical framework for developing robust material deprivation indicators for the whole population in the context of European Union. They carried out a systematic item by item analysis at country levels to identify material deprivation items which satisfactorily meet suitability, validity, reliability and additive criteria across the European Union. There have been some efforts to include multiple indicators in measuring poverty in Nepal (CBS 2013; Alkire et al. 2013; NHDR 2014; Mitra 2016). However, we understand that these Nepal-specific estimates of multidimensional poverty have methodological limitations both in terms of estimation procedures and the use of indicators and their units of measurement. This study is an attempt to refine the measure of multidimensional poverty both regarding its dimensionality and estimation procedure and fill this gap in the literature, specifically in the context of Nepal. Below we provide a theoretical background and evidence of multi-dimensional poverty measures used in previous studies. Then, we describe data, proposed method and its advantage over existing method, indicators of alternative dimensions and the procedure used to estimate the multi-dimensional poverty in this study compared to other studies in Nepal (CBS 2013; Alkire et al. 2013; NHDR 2014; Mitra 2016; Uematsu et al. 2016). 2 Measuring Poverty: Past Efforts and Our Approach Debates on measuring poverty were intensified in the 1970s but these discussions were mainly about measuring income poverty and defining poverty line. During this period, the identification of poor was exclusively by family-size-adjusted household income, concerning a specified income poverty line. Some contributions are worth mentioning here, for example, Townsend (1954; 1971; 1979), Sen (1970, 1972, 1973, 1992, 2000b),
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