Multidimensional Poverty Measurement with Economic Well‐being, Capability, and Social Inclusion: A Case from Kathmandu, Nepal

The contemporary, income and consumption approaches to poverty definition and measurement, which are unidimensional in nature, are unable to capture multiple dimensions of poverty. The multidimensional approach operationalized here in the structural equation framework suggests that the multidimensionality of poverty hypothesis holds for the population in Kathmandu, Nepal, including economic well‐being, capability, and social inclusion. While all of these dimensions are integral, the capability dimension appears to be highly influential, affecting every other poverty dimension. This paper identifies indicators appropriate to measure different poverty dimensions and, although the multidimensional approach necessitates further work for more simplified and policy relevant application, alternative ways are explored with their practical implications.