Employment Intensity of Economic Growth: Evidence from Nepal

Economic growth and employment are taken as the top twin objectives of macroeconomic policy agenda in both developed and developing countries. Economic growth brings changes in employment growth. In general, during time of the growth of gross domestic product (GDP) increasing employment opportunities are created while unemployment will be rising during economic deceleration. This paper examines employment intensity of growth in (i) the economy of Nepal in totality, (ii) three broad economic sectors, and (iii) different sub-sectors of the economy over the period 1998-2018. Empirical result indicates labor-intensive growth in Nepal over the review period. There is no indication of jobless growth.

Does Education and Experience Matter in the Distribution of Wages in Nepal? A Quantile Regression Approach

Labor market returns depend on the level of education as well as experience of the labors. Though education is argued to be the key determinant of wage rate, other factors such as the sector of employment, gender of the employee, marital status and work industry also matter. This paper investigates the returns from years of schooling and experience by examining the wage structure in formal, informal and agriculture sectors of Nepal. The Mincerion wage equation and quantile regression technique has been used to analyze such impact by utilizing the recent labor force survey data of Nepal. Our results show that wage returns are positively associated with schooling in all the three sectors. However, return to experience has negative association in case of agriculture sector. Furthermore, return to schooling has higher impact at higher quantile along with the distribution of wages in formal sector and informal sector. The maximum effect of education is 4 percent at 0.90 quantile in formal sector. An additional year of experience has high impact at lower-wage group in case of informal and formal sector. The effect varies from 9.2 percent at 0.1 quantile and 4.9 percent at 0.9 quantile in formal sector. The experience effect is higher at median (4.06 percent) in case of informal sector.

Agricultural Transformation in Nepal: Trends, Prospects, and Policy Options

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Is Foreign Employment a Preferred Informed Choice among Households? Evidence from Nepal

Foreign employment is one of the most significant phenomena impacting a wide range of dimensions in South Asian economies that characterize a large population out-migrating for work. whether sending a member for foreign employment a preferred informed choice of households in such economies, is not known. This paper aims to examine this research question using a binary logit model using indicators of household informed decision making, leadership qualities and the access to social networks. The findings indicated that foreign employment is not a preferred choice of households but is primarily the decision of the individual to go for foreign employment rather remain unemployed and economically insecure at home. Further analysis revealed that outstanding loans were higher, and the loans paid last year were also higher for foreign employment households compared to non-foreign employed households. The mean per capita consumption of households with foreign employed member were not statistically different than those of non-foreign employed households indicating no significant welfare gain for a majority of foreign employed labour households.

An Estimation of Technical Efficiency of Poultry Farming in Nepal

The commercial poultry is growing rapidly in Nepal which requires that efficient level of output that ensures high levels of productivity and profit is produced. The objective of this study is to estimate the technical efficiency of the poultry farming in Nepal and its distribution spatially across the districts. The study utilizes Cobb-Douglas production function to define the structure of the production model and its error term is assumed to follow exponential distribution. Thereafter, using maximum likelihood estimator, parametric approach to Stochastic Frontier Method is applied to the data obtained from Nepal Commercial Poultry Survey 2015. The study finds technical efficiency of 92 percent suggesting high efficiency. Assuming half-normal distribution in the error term, however, yields technical efficiency of 89 percent. Further disaggregation of technical efficiency by districts shows its homogenous distribution across the districts covered in the study. The study, hence, suggests the possibility to increase its production to the level of potential output by improving technical efficiency. One of the various ways to improve technical efficiency is by ensuring high quality inputs both physical and technical to the poultry farms.

Vulnerable Family Members and Income in Chepang Minority

Chepang, an indigenous minority comprising of about 0.26% of Nepal’s population, are ‘highly marginalised’. The presence of vulnerable family members such as single women, people with disability and elderly in the Chepang household may further marginalise them. We used 2019 census data of a rural municipality to estimate farm, non-farm and total incomes in the Chepang households’ and conducted regressions analysis to identify influencing factors, including the effect of the presence of single women, disability and elderly members on household incomes. The study found that Chepang households were mainly engaged in farms, however, the share of non- farm income was significant. On average, a Chepang individual earned US$330 per year. Per capita farm income estimated was US$120, and that of non-farm was US$279. Non-farm income was however constrained by the presence of single women and people with disability. The presence of a single woman caused to reduce non-farm income by 13.4%. Likewise, non-farm income reduced by 20.5% when a Chepang household had disabled member. We suggest further studies on vulnerable members, particularly on their health conditions, and access to government services under the changing social, cultural, and environmental conditions.

Assessment of Long and Short Run Relationship Amongst Macroeconomic Variables and Economic Growth of Nepal

This paper examines the long and short run relationship among selected macroeconomic variables and economic growth of Nepal. The objective of the research is to examine empirically the long and short run relationship among macroeconomic variables; gross fixed capital formation, human capital, government expenditure, foreign aid, and trade openness on economic growth of Nepal. The study period spanned from 1975 to 2016. The data has the annual frequency. The time series properties of the data were, first, analyzed using the Augmented Dickey-Fuller (ADF) test and then Auto-Regressive Distributive Lag (ARDL) approach to cointegration is employed to assess the direction of impact and long-run relationships between the variables. Besides these, other diagnostic tests are also conducted. The ARDL bound test analysis depicts the presence of cointegration relationship between real GDP and employed macroeconomic determinants. The negative and significant error correction coefficient further provides substantial evidence that there is long-run association among real gross domestic product and selected macroeconomic variables. The ARDL model shows that Gross fixed capital formation and government expenditure have a significant positive relationship on economic growth in the long run while trade openness has a significant negative relationship on economic growth in the long run. Thus, the findings suggest that GFCF and GE are the major macro determinants to robust the economic growth of Nepal. In order to achieve the desired rate of economic growth it is suggested that there should be a continuous investment in gross fixed capital formation including plants, machinery, raw materials, industrial buildings and technology (research and development). It is also suggested that structural changes should be made in school institutions with the provision of providing quality education with cognitive skills and added resources through quality and skilled teachers. Nepal must have more effective trade openness, particularly by productively controlling import of consumption goods, and by introducing import substitution policies, in boosting their economic growth through international trade.

Potential Inter-Fuel Substitution between Hydroelectricity and Fossil Fuels in Nepal

In spite of huge hydro-electricity potential, Nepal still relies on fossil fuel to meet its energy demand. However, as the pace of hydroelectricity generation gets momentum in recent years, there are concerns about the excess supply of hydroelectricity in the domestic market in the near future. In this context, this paper examines the potential substitution of conventional fuels by the hydroelectricity in Nepal. Using translog production function, this paper calculates the elasticity of substitution between hydroelectricity, coal, gas, petrol, diesel, and kerosene for the period of 1980 to 2016. Our findings suggest that all the fuels except kerosene are positively associated with economic growth during the study period, and the output elasticity of hydroelectricity is found be largest among these sources of energy. The findings also suggest that hydroelectricity has the potential for substitute other conventional fuels if the share of hydroelectricity is increased in the energy consumption composition. While there is not a huge variation in the elasticity of substitution between hydroelectricity and other fuels, the hydroelectricity has relatively higher potential to substitute coal followed by petrol, diesel, kerosene, and gas. The findings of the paper are supportive of the hypothesis that Nepal could potentially absorb the hydroelectricity generated in near future if incentive mechanisms are initiated that allow substitution of conventional fossil fuels by the hydroelectricity.

Money Demand Function for Nepal: An Empirical View from Expenditure Component

This paper examines the long run and short-run dynamics relationship between broad money, consumption expenditure, capital stock and interest rate in Nepal over the period of 1975-2017. This paper employs ARDL bound testing approach for co-integration between the broad money demand and its determinants. Result reveals the evidence of cointegration among the variables. The empirical results show that the demand for money is affected by the interest rate and final consumption expenditure both in the long run and short-run. However, the gross fixed capital formation has no impact on demand for money in the long-run and short-run as well. On contrast, interest rate is positively associated with Broad money demand, which is not consistent with theoretically. Positive association of money demand with interest rate shows that demand for money function is instability in Nepal. Thus, this study suggests that policy maker to correct price fluctuation through the control of various expenditure components, particularly, real final consumption expenditure might be an important strategy in the long run. However, the gross fixed capital formation has no impact on demand for money in the long-run.

Household Fuel Transition and Determinants of Firewood Demand in Nepal

There is an emerging challenge of providing cleaner fuel to household to avoid various health risks arising from the use of traditional non-cleaner fuel and to cope with the challenges created by climate change. The energy transition theories explain how societies switch from traditional to more advanced fuels that are cleaner and efficient. The paper examines the state of fuel transition and determinants of firewood dependence in Nepal. This paper uses data collected in 2013 from three different ecological zones through household surveys. The findings revealed that biomass fuel particularly firewood is the dominant form of fuel used for household cooking with 84 percent dependence followed by LPG 9 percent, biogas 6 percent and electricity around 1 percent. The findings revealed that energy security through energy stacking is a dominant phenomenon. Presence of alternative fuel that are cleaner and convenient and ecological factors are major determinants of household firewood demand followed by literacy status, landholding size, household size, presence of large ruminant. Firewood consumption had negative relation with its price but the relation was not economically significant. In contrast to the study hypotheses, household income and remittance were not determining factors. In view of wider coverage of electricity, there is prospect for shifting to renewable fuel sources through appropriate pricing and technological improvement policies.