# **5. Conclusions**

In this paper, we introduce a variety of concepts and methods to look at living standards improvement in Nepal in a dynamic perspective. Economic and social mobility is a fundamental equalizer and structural inequalities will typically decrease in societies where individuals from all segments of the population can participate in the growth process. From an intergenerational perspective, a society in which children can aspire to achieve and indeed can achieve levels of education, jobs, and living standards that are materially different from the levels enjoyed by their parents is a society that will automatically begin to redress some of these inequalities. Mobility is not just important from the point of view of equity, it also has efficiency benefits. If talent is distributed more equally in society than the opportunities to exercise these talents, then a mobile society will be better able to mobilize and utilize these talents by allowing people from all segments of society to contribute to the growth process. A mobile society in which individuals from all walks of life, including those with historical disadvantages, can succeed or fail based on nothing else but their effort and hard work, will also have higher levels of motivation and effort and this will have implications for growth.

Our analysis shows that there has been significant upward mobility in educational attainments as a majority of Nepalis today are better educated than their fathers. Intergenerational mobility, on average, has been less spectacular with about 43 percent of Nepalis expecting to be in better occupations than their fathers while 47 percent is likely to remain in the same occupation as their father. Expected upward mobility is uniformly larger for younger cohorts consistent with the expansion of mass education in the last three decades. Upward occupational mobility too has an age gradient with a discontinuous jump of about 10 percent for cohorts that are likely to have been in their formative years (in school) around the time the Nepali economy liberalized creating newer opportunities in the labor market. Looking across different social groups, Newars, followed closely by hill Brhamins and Chhettris have the best odds of surpassing their father’s education and occupation levels. On the other hand, Nepalis in Muslim and other minority caste categories followed by Terai Brahmin Middle Caste, and Dalit categories have the lowest odds of doing so. Finally, the odds of upward mobility are significantly better for households who have managed to also be mobile spatially. That is, individuals born in rural Nepal but currently living in urban areas have significantly better odds of doing better than their fathers than individuals who were born in rural areas and continued to stay in rural areas.

We also introduced and used synthetic panel methodology to show the extent of directional income movement within a generation. In particular, we used this technique to unpack net poverty movements and disentangle the proportion of Nepali population falling into and out of poverty. Our results show that for every two Nepalis moving out of poverty in the last couple of poverty reduction episodes, there is one Nepali falling back into poverty. Alongside these movements in and out of poverty, our results also suggest a sizeable persistence in poverty status: based on data from the three rounds of NLSS, we conclude that 60 percent of those that are found to be poor in any given year actually suffer from chronic poverty.

Generalizing, the notion of the risk of falling into poverty, we propose a distinctly economic definition of vulnerability that we argue is an improvement over heuristic definitions such as the level of clustering above 18