Expenditure inequality increased over the 9 years period. There is an extreme case on the inequality of the expenditure of health and education. It reveals that the poor have no access to health and education.
Dr. Kamal Raj Dhungel
Production and consumption are two basic fundamentals of economics. Firms produce goods and services with a view to satisfy human wants. In turn, households consume those goods and services creating demand for the product. However, not all goods and services have the same level of demand and are not easily consumed in the market. The major determinant of consumption is income with a positive relationship. That is to say, higher income generates higher consumption and in turn economy produces more goods and services to meet the higher demand. A recent study of relationship between income and consumption shows that the marginal propensity to consume in Nepal is high near to 0.9 indicating a lower level of marginal propensity to save. This implies that with the every additional increase in income of people increases the consumption of goods and services proportionately. But in a given society or community there are differences in both income and consumption. A set of people earn and consume more than another set of people. Given this hypothesis, this article attempts to analyze the trends and patterns of per capita consumption in which total consumption consists of food, non-food, education, housing and health, of different groups of people between 1995/96 and 2003/04 on the basis of the data of Nepal Living Standard Survey (NLSS).
The growth rate of per capita consumption
Poverty is rampant in Nepal. Basically poor have lower level of income followed by low level of consumption. The annualized growth rate of per capita consumption of poor was 2.5 percent during the period 1995/96 and 2003/04. It was 2.6 and 1.5 times lesser than the annualized growth rate of the per capita consumption of the rich and nearest rich respectively. It is again more interesting and alarming that the annualized growth rate of nearest poor was 2.2 percent which is lower than the annual growth rate of poor during the same period of time. The annualized growth rate of nearest poor was 2.9 and 1.6 times lesser than the annualized growth rate of the rich and nearest rich respectively. Similarly, the annualized growth rate of nearest poor is 0.88 times lesser than the per capita consumption of poor. The annualized growth rate of the per capita consumption of middle in the same period was 2.9 percent which is 0.9 and 0.8 times greater than the annualized growth rate of the per capita consumption of poor and nearest poor respectively. However, the annualized growth rate of per capita consumption of this group is 1.3 and 2.2 times lesser than the nearest rich and rich respectively. The annualized growth rate of nearest rich was 3.7 percent. This growth rate is 0.8 times greater than the middle class group and 1.7 times higher than those of rich. The rich has highest level of growth rate. The annualized growth rate of per capita consumption was 4.6 percent representing highest among the five groups under consideration.
The growth rate of per capita consumptionPoverty is rampant in Nepal. Basically poor have lower level of income followed by low level of consumption. The annualized growth rate of per capita consumption of poor was 2.5 percent during the period 1995/96 and 2003/04. It was 2.6 and 1.5 times lesser than the annualized growth rate of the per capita consumption of the rich and nearest rich respectively. It is again more interesting and alarming that the annualized growth rate of nearest poor was 2.2 percent which is lower than the annual growth rate of poor during the same period of time. The annualized growth rate of nearest poor was 2.9 and 1.6 times lesser than the annualized growth rate of the rich and nearest rich respectively. Similarly, the annualized growth rate of nearest poor is 0.88 times lesser than the per capita consumption of poor. The annualized growth rate of the per capita consumption of middle in the same period was 2.9 percent which is 0.9 and 0.8 times greater than the annualized growth rate of the per capita consumption of poor and nearest poor respectively. However, the annualized growth rate of per capita consumption of this group is 1.3 and 2.2 times lesser than the nearest rich and rich respectively. The annualized growth rate of nearest rich was 3.7 percent. This growth rate is 0.8 times greater than the middle class group and 1.7 times higher than those of rich. The rich has highest level of growth rate. The annualized growth rate of per capita consumption was 4.6 percent representing highest among the five groups under consideration.
The share of per capita consumption
The share of per capita consumption of the poor was 8 percent in 1995/96. The population below poverty was 42 percent. During the period of 9 years, the number of poor reduced to 32 percent. However, the share of per capita consumption was 7 percent in 2003/04 which is lesser than the share of 1995/96. The same is the case of nearest poor. The share of per capita consumption was 12 and 10 percent in 1995/96 and 2003/04 respectively. Similarly, the share of per capita consumption of middle and near rich was 16 and 21 percent respectively in 1995/96 which is greater than the per capita consumption shares (14 and 20 percent) of 2003/04. From the above analysis it is found that the share of per capita consumption of all the four groups (poor, near poor, middle and near rich) is not increasing during the same period of time amidst the reduction of 10 percentage points of the absolute poor in Nepal. The share of per capita consumption of the rich increased from 43 percent in 1995/96 to 49 percent in 2003/04.
Inequality
The Gini coefficient (GC) is the most popular method to measure inequality. The value of GC ranges from 0 to 1 indicating extreme situation of inequality. The overall expenditure inequality increased from 34.4 percent in 1995/96 to 41.4 percent in 2003/04 with the annual growth rate of 2.3 percent. The inequality in food consumption (expenditure) decreased to 26 percent in 2003/04 from 27 percent in 1995/96 with the annual growth rate of (-) 0.8 percent. Expenditure inequality on non-food items increased from 51 percent in 1995/96 to 59 percent in 2003/04 with the annual growth rate of 1.9 percent. Similarly, expenditure inequality on education decreased to 80 percent in 2003/04 from 81 percent in 1995/96 with the annual growth rate of (-) 0.2 percent. Likewise, expenditure inequality in health increased from 76 percent in 1995/96 to 78 percent in 2003/04 with the annual growth rate of 0.4 percent. From the analysis it is found that the expenditure inequality on food items and education decreased marginally indicating a little improvement towards achieving equality in these attributes. But the expenditure inequality increased on non-food item and health. The value of GC in health and education in both the period under consideration is high representing 0.81 and 0.76 in 1995/96 and 0.80 and 0.78 in 2003/04 respectively. It shows the extreme inequality in the distribution of the expenditure on education and health.
Conclusion
Expenditure inequality increased over the 9 years period under consideration. There is an extreme case on the inequality of the expenditure of health and education. It reveals that the poor have no access to health and education. In aggregate the inequality increased from 34.4 percent in 1995/96 to 41.4 percent in 2003/04 with the annual growth rate of 2.3 percent. Given the scenario, during the period there is a significant reduction of poor from 42 percent in 1995/96 to 32 percent in 2003/04. The progress in reducing poverty cannot be taken as sustainable because the inequality in the distribution of expenditure is mounting over the years.
(The author is Associate Professor, Central Department of Economics, Tribhuvan University.)Source: www.nepalnews.com
The share of per capita consumption of the poor was 8 percent in 1995/96. The population below poverty was 42 percent. During the period of 9 years, the number of poor reduced to 32 percent. However, the share of per capita consumption was 7 percent in 2003/04 which is lesser than the share of 1995/96. The same is the case of nearest poor. The share of per capita consumption was 12 and 10 percent in 1995/96 and 2003/04 respectively. Similarly, the share of per capita consumption of middle and near rich was 16 and 21 percent respectively in 1995/96 which is greater than the per capita consumption shares (14 and 20 percent) of 2003/04. From the above analysis it is found that the share of per capita consumption of all the four groups (poor, near poor, middle and near rich) is not increasing during the same period of time amidst the reduction of 10 percentage points of the absolute poor in Nepal. The share of per capita consumption of the rich increased from 43 percent in 1995/96 to 49 percent in 2003/04.
Inequality
The Gini coefficient (GC) is the most popular method to measure inequality. The value of GC ranges from 0 to 1 indicating extreme situation of inequality. The overall expenditure inequality increased from 34.4 percent in 1995/96 to 41.4 percent in 2003/04 with the annual growth rate of 2.3 percent. The inequality in food consumption (expenditure) decreased to 26 percent in 2003/04 from 27 percent in 1995/96 with the annual growth rate of (-) 0.8 percent. Expenditure inequality on non-food items increased from 51 percent in 1995/96 to 59 percent in 2003/04 with the annual growth rate of 1.9 percent. Similarly, expenditure inequality on education decreased to 80 percent in 2003/04 from 81 percent in 1995/96 with the annual growth rate of (-) 0.2 percent. Likewise, expenditure inequality in health increased from 76 percent in 1995/96 to 78 percent in 2003/04 with the annual growth rate of 0.4 percent. From the analysis it is found that the expenditure inequality on food items and education decreased marginally indicating a little improvement towards achieving equality in these attributes. But the expenditure inequality increased on non-food item and health. The value of GC in health and education in both the period under consideration is high representing 0.81 and 0.76 in 1995/96 and 0.80 and 0.78 in 2003/04 respectively. It shows the extreme inequality in the distribution of the expenditure on education and health.
Conclusion
Expenditure inequality increased over the 9 years period under consideration. There is an extreme case on the inequality of the expenditure of health and education. It reveals that the poor have no access to health and education. In aggregate the inequality increased from 34.4 percent in 1995/96 to 41.4 percent in 2003/04 with the annual growth rate of 2.3 percent. Given the scenario, during the period there is a significant reduction of poor from 42 percent in 1995/96 to 32 percent in 2003/04. The progress in reducing poverty cannot be taken as sustainable because the inequality in the distribution of expenditure is mounting over the years.
(The author is Associate Professor, Central Department of Economics, Tribhuvan University.)Source: www.nepalnews.com
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