Chapter 4: The Determinants and Consequences of Chronic and Transient Poverty in Nepal, 1995–96 to 2003–04
Saurav Dev Bhatta and Suman K. Sharma INTRODUCTION As in most other developing countries, poverty reduction strategies and policies in Nepal are primarily informed by periodic cross section household survey data that provide estimates of static poverty measures and poverty profiles. Interestingly, however, the focus of these policies appears to be chronic or long-term poverty – poverty that is not necessarily reflected in cross-sectional survey data. While estimates of poverty at specific points in time might correlate with chronic poverty to some extent, such estimates are more representative of poverty that is transient in nature. Hence, an issue of interest is the extent to which there is an overlap between the factors that explain transient and chronic poverty. If the determinants of chronic and transient poverty are quite different, then different policy measures would be required to address these two aspects of poverty. An understanding of common determinants, on the other hand, could point to poverty reduction strategies that apply to both poverty types. In Nepal, a rigorous analysis of the determinants/correlates of chronic and transient poverty has never been performed although a nationally representative panel of 962 households is available for 1995–96 to 2003–04. Hence, the main objective of this study is to explore the differential impacts of various poverty determinants on chronic versus transient poverty at the household level in Nepal, with a special focus on three explanatory factors: wealth, human capital and ethnicity. We also examine the impact that the decade-long Maoist insurgency, which was one...
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