Impact of Unemployment, Income Inequality, Inflation Rate, and Political Stability on Poverty: An Empirical Study of Nepal

Arjun Kumar Dahal, Lecturer (Economics), Tribhuvan University, Faulty of Humanities and Social Science, Mechi Multiple Campus, Jhapa, Nepal
Prem Bahadur Budhathoki, Associate professor, Tribhuvan University, Faculty of Management, Saraswati Multiple Campus, Kathmandu, NepalFollow
Ganesh Bhattarai, Tribhuvan University, Faculty of Management, Nepal Commerce Campus, Minbhawan, Kathmandu

Article Type

Research Article

Abstract

This study examines the impact of income inequality, political stability, inflation rate, and economic growth on poverty in Nepal. It is based on the positivist research philosophy and quantitative. This study is based on secondary data, covering 33 data points from 1990 to 2022, which are collected from reports from the World Bank and economic surveys of Nepal. Simple economic tools like descriptive statistics, simple linear regression, Omnibus ANOVA test, multicollinearity test, Durbin-Waston test for autocorrelation, normality test (Shapiro-Wilk), Q-Q plots, residual plots are used in the analysis. Income inequality and political stability are statistically significant in determining poverty, but inflation and economic growth are not statistically significant enough to explain poverty in Nepal. The coefficient for the inflation rate suggests that a one-unit increase in the inflation rate is associated with a 0.2286-unit rise in poverty. However, this result is not statistically significant at 0.05. The coefficient for the Gini Index indicates that a one-unit increase in the Gini Index, which measures income inequality, is associated with a 1.6137 unit increase in poverty, and this relationship is statistically significant (p = 0.025). The coefficient for the political stability index suggests that a one-unit increase in political stability is associated with a 0.4530 unit decrease in poverty, and this relationship is statistically significant (p = 0.001). It is observed that 60.6 percent variation in poverty levels can be explained by income inequality, inflation rate, political stability, and economic growth of Nepal. Policy implications drawn from these findings suggest that addressing income inequality and promoting political stability should be prioritized to alleviate poverty in Nepal. At the same time, careful consideration is needed in assessing the impact of inflation rate and economic growth on poverty levels.

Keywords

Absolute poverty, alleviate, collinearity, violence, residuals

Recommended Citation

Dahal, Arjun Kumar; Budhathoki, Prem Bahadur; and Bhattarai, Ganesh (2024) "Impact of Unemployment, Income Inequality, Inflation Rate, and Political Stability on Poverty: An Empirical Study of Nepal," Arab Economic and Business Journal: Vol. 16 : Iss. 2 , Article 1.
Available at: https://doi.org/10.38039/2214-4625.1044