Synergies among monetary, multidimensional and subjective poverty: evidence from Nepal

Abstract

In this paper we construct a Nepal specific multidimensional poverty index using the Nepal Longitudinal Sample Survey (NLSS) for the period 1995–2010. The indicators for Nepal Multidimensional Poverty Index (NMP) have been chosen using the goals set by the Government of Nepal and the perceptions of adequacy as reported by households. In doing so this study combines multidimensional and subjective methods of measuring wellbeing. The subjective data is used to guide the choice of dimensions for the multidimensional analysis. Our findings show that Nepal has had a dramatic fall in multidimensional poverty along with the observed fall in consumption poverty in this period. Comparing the extent to which consumption poverty accurately identifies the multidimensionally poor, we find the error has reduced over time but remains large in proportion to the poverty rate implying the need for a multidimensional measure. For the different ethnic groups and regions the patterns of reduction in poverty are not homogenous and are different from those of consumption poverty with the NMP outperforming the consumption poverty in tracking targeted policy actions.