Relationship Between Increasing Old Age Allowances and GDP in Nepal
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Department of Economics
Abstract
Ageing of the population has one of the most important facts that came to the
foreground in 21th century and is inevitable fact. Along with this, it’s a challenge
to protect the elder population socially and economically for the government,
specially developing countries like Nepal which have very small economic share in
the world. The aim of this thesis is to know the relationship between old age
allowances and GDP along with education expenses and to investigate
consequences it can cause.
Social protection schemes have historically been weak and fragmented in the
region and have failed to keep pace with economic growth. Consequently, old age
has too often become an expensive burden for individuals, families, and society.
Social protection is not only important in reducing old people’s vulnerabilitypension
can
also
boost
economic growth by providing income for individuals and
somehow can helps in reducing poverty. Nepal have introduced non contributory
pension systems that provide cash benefits to older citizens, but much is yet to be
learned about their impact and possible replication in others.
Providing old age allowances are not a panacea. Rather, they should be part of a
wide ranging set of program and sector reforms. Moreover, the differences in
cultures and stages of economic development across the region must also be taken
into account. And also, the capability of the country’s administration to support
the program also need to be considered and should be addressed.
Different researchers had traced that for long run economic growth investing on
infrastructure is the most rather than on recurrent expenditure. Some other traced
out that the country having more dependent population attracts less FDI. The total
Nepalese population has been increasing and elder population above 60 years
constitutes 7.99 percent of total population in 2011, which is estimated be 10.2 percent by 2031. Comparing to other South Asia countries Nepal provides highest
OAA in terms of cash which is around $20 per month.
Thus, to support the objective the correlation has been tested taking two variables;
social security expense and expenses on education. The result found that there is
positive relation between GDP and expenses on education whereas it is found that
there is negative relation between GDP and expenses on allowances to elder
population. It means investing on education is better as it will produce skilled
human capital which is a need for future, investing on infrastructure will generate
the local entrepreneurs and attract investors; both local and international
supporting the national economy.