IDEAS home Printed from https://ideas.repec.org/a/vrs/vaecst/v15y2024i1p1-14n1001.html
   My bibliography  Save this article

Nexus between Unemployment, Income Inequality, Political Stability, and Economic Growth: An Empirical Study of the Nepalese Economy

Author

Listed:
  • Arjun Kumar Dahal

    (Tribhuvan University, Nepal)

  • Prem Bahadur Budhathoki

    (Tribhuvan University, Nepal)

  • Ganesh Bhattarai

    (Tribhuvan University, Nepal)

Abstract

This study aims to investigate the influence of political stability, unemployment, and income inequality on the economic growth of Nepal while also exploring the reciprocal impact of economic growth, unemployment, and political stability on income inequality within the country. It only uses secondary data from various World Bank reports and Nepal's economic surveys. It only covers 32 data points spanning from 1991 to 2022. The descriptive and exploratory research designs are used in this study. Simple statistical tools like correlation analysis, Unstandardized and standardized regression analysis, analysis of variance (ANOVA), residual statistics, histogram, and scatterplot for residual analysis are used in this analysis. Unemployment has negative and political stability positively impacts economic growth in Nepal. One percent increase in unemployment results in a 1.920 percent decrease in economic growth. Likewise, one percent increase in the political stability index results in a 0.804 percent increase in economic growth in Nepal. Unemployment hurts more on economic growth than income inequality in Nepal. Unemployment, political stability, and GDP growth are individually and jointly affected by income inequality in the nation. Political stability and economic growth decrease income inequality, but unemployment increases income inequality in the Nepalese economy. One unit increase in the political stability index and economic growth results in -4.356 and -0.117 unit decrease in income inequality in Nepal. The political stability index has a multiplier effect in decreasing income inequality. Unemployment causes income inequality. One unit increase in unemployment results in a 1.121 unit increase in income inequality. Unemployment has a multiplier effect on income determination in Nepal. About 39.7 percent variation in economic growth is determined by political stability, unemployment, and income inequality, but 46.7 percent in income inequality is determined by unemployment, economic growth, and political stability. Policymakers should consider a holistic approach that addresses income inequality, unemployment, and political stability to foster sustainable and inclusive economic growth. The abstract is not a substitute for the introduction.

Suggested Citation

  • Arjun Kumar Dahal & Prem Bahadur Budhathoki & Ganesh Bhattarai, 2024. "Nexus between Unemployment, Income Inequality, Political Stability, and Economic Growth: An Empirical Study of the Nepalese Economy," Valahian Journal of Economic Studies, Sciendo, vol. 15(1), pages 1-14.
  • Handle: RePEc:vrs:vaecst:v:15:y:2024:i:1:p:1-14:n:1001
    DOI: 10.2478/vjes-2024-0001
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/vjes-2024-0001
    Download Restriction: no

    File URL: https://libkey.io/10.2478/vjes-2024-0001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2010. "Growth in a Time of Debt," American Economic Review, American Economic Association, vol. 100(2), pages 573-578, May.
    2. Martin Paldam, 1998. "Does Economic Growth Lead to Political Stability?," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 9, pages 171-190, Palgrave Macmillan.
    3. Ugyen Tenzin, 2019. "The Nexus Among Economic Growth, Inflation and Unemployment in Bhutan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 94-105, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Balima, Hippolyte Weneyam, 2020. "Coups d’état and the cost of debt," Journal of Comparative Economics, Elsevier, vol. 48(3), pages 509-528.
    2. Manuel Funke & Moritz Schularick & Christoph Trebesch, 2023. "Populist Leaders and the Economy," American Economic Review, American Economic Association, vol. 113(12), pages 3249-3288, December.
    3. Roberto Martino & Phu Nguyen-Van, 2014. "Labour market regulation and fiscal parameters: A structural model for European regions," Working Papers of BETA 2014-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Mara Leticia Rojas & María María Ibáñez Martín & Carlos Dabús, 2023. "Is Debt Always Harmful for Economic Growth? Evidence from Developing Countries," Working Papers 292, Red Nacional de Investigadores en Economía (RedNIE).
    5. Brahmbhatt, Milan & Canuto, Otaviano & Vostroknutova, Ekaterina, 2010. "Dealing with Dutch Disease," World Bank - Economic Premise, The World Bank, issue 16, pages 1-7, June.
    6. Paul J.J. Welfens, 2011. "The Twin Crisis: From the Transatlantic Banking Crisis to the Euro Crisis?," EIIW Discussion paper disbei187, Universitätsbibliothek Wuppertal, University Library.
    7. İbrahim Özmen & Mihai Mutascu, 2024. "Public Debt and Growth: New Insights," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8706-8736, June.
    8. Janice Boucher Breuer & John McDermott, 2019. "Debt And Depression," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 714-730, October.
    9. Boss, Alfred & Dovern, Jonas & Groll, Dominik & Meier, Carsten-Patrick & van Roye, Björn & Scheide, Joachim, 2010. "Deutschland: Konjunkturelle Erholung setzt sich in verlangsamtem Tempo fort - Gefahr eines Rückschlags durch die Schuldenkrise," Open Access Publications from Kiel Institute for the World Economy 45571, Kiel Institute for the World Economy (IfW Kiel).
    10. Magdalena Osińska & Tadeusz Kufel & Marcin Błażejowski & Paweł Kufel, 2020. "Modeling mechanism of economic growth using threshold autoregression models," Empirical Economics, Springer, vol. 58(3), pages 1381-1430, March.
    11. António Afonso & José Alves, 2017. "Stock-Flow Adjustments and Interest Rates," Working Papers Department of Economics 2017/05, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    12. Galstyan, Vahagn & Herzberg, Valerie, 2018. "External Balance Sheet Risks in Ireland," Financial Stability Notes 09-18, Central Bank of Ireland.
    13. Annette N. Brown & Drew B. Cameron & Benjamin D. K. Wood, 2014. "Quality evidence for policymaking: I'll believe it when I see the replication," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 6(3), pages 215-235, September.
    14. repec:spo:wpmain:info:hdl:2441/3l2vounfl99nvqsr0k24sn3k5l is not listed on IDEAS
    15. Dias, Daniel A. & Richmond, Christine & Wright, Mark L.J., 2014. "The stock of external sovereign debt: Can we take the data at ‘face value’?," Journal of International Economics, Elsevier, vol. 94(1), pages 1-17.
    16. Atems, Bebonchu, 2019. "The effects of government spending shocks: Evidence from U.S. states," Regional Science and Urban Economics, Elsevier, vol. 74(C), pages 65-80.
    17. Gärtner, Manfred & Griesbach, Björn & Mennillo, Giulia, 2013. "The near-death experience of the Celtic Tiger: a model-driven narrative from the European sovereign debt crisis," Economics Working Paper Series 1321, University of St. Gallen, School of Economics and Political Science.
    18. Antonio Afonso & Jose Alves, 2015. "The Role of Government Debt in Economic Growth," Hacienda Pública Española / Review of Public Economics, IEF, vol. 215(4), pages 9-26, December.
    19. Wahidin, Deni & Akimov, Alexandr & Roca, Eduardo, 2021. "The impact of bond market development on economic growth before and after the global financial crisis: Evidence from developed and developing countries," International Review of Financial Analysis, Elsevier, vol. 77(C).
    20. Döhrn, Roland & an de Meulen, Philipp & Barabas, György & Gebhardt, Heinz & Kitlinski, Tobias & Micheli, Martin & Schmidt, Torsten & Vosen, Simeon & Zimmermann, Lina, 2011. "Die wirtschaftliche Entwicklung im Inland: Zunehmende Risiken für die Konjunktur," RWI Konjunkturberichte, RWI - Leibniz-Institut für Wirtschaftsforschung, vol. 62(2), pages 41-90.
    21. Eiji Fujii, 2024. "Currency concentration in sovereign debt, exchange rate cyclicality, and volatility in consumption," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(1), pages 169-192, February.

    More about this item

    Keywords

    income inequality; multiplier; unemployment; political stability; corruption;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:vaecst:v:15:y:2024:i:1:p:1-14:n:1001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.