Flow Structure in Nepal and the Benefit to the Poor

In this paper we use the latest Social Accounting Matrix (SAM) for Nepal and some complementary data to specify the concentration of the poor in this typical South Asian village economy. Applying SAM multipliers, we analyze the flow structure in Nepalese economy. On top of this analysis, we simulate the effects of demand injections to sectors and transfer injections to households and use Relative Distributive Measure introduced by Cohen (1988) to study the strengths of these multiplier effects with respect to their sectoral and household income shares. We conclude that in order to benefit the poorest household group most, economic restructuring is required because in the given flow structure the benefit to the poorest is only modest. Currently, even if the sectoral injections are through agriculture and transfer injections through poorer household groups, the middle income groups benefit the most.