Productivity and Growth in Nepal: An Empirical Analysis

Abstract

This paper is mainly concerned with how productivity growth can be achieved in Nepal. The paper builds by explaining that growth in Nepal is explained by capital accumulation that the higher the capital accumulation the higher the GDP – the lower the capital accumulation the lower the GDP.  We calculate that Total Factor productivity in Nepal is negative, which is vastly responsible for the sluggish performance of the economy. We found that one way of improving TFP is through the reallocation of public spending. Public Spending of Education and infrastructure has higher returns in achieving productivity growth in Nepal.

This paper also discusses about institutional and structural barrier for the technological progress in Nepal Economy and suggests policies to promotes domestic innovation of technology which ultimately enhances productivity. In order to do so, Governance, institutions, companies and technology supporting organizations like university, research centers needs to have better facilitating inter-firm relationships/cooperation which allows domestic innovation of the technology.  Since technology is the major factor for productivity increase, such domestic innovation can play great role for increasing the growth of the Nepalese economy.

Keywords: Total Factor Productivity, Growth, Institutions and Growth, Public Spending, Technological Innovation

JEL Classification : D24, N1, 004, P43, Q55