Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys

Abstract

The paper investigates the impact of growth on poverty in Ethiopia by analysing panel data covering 1994-97, a period of economic recovery driven by peace, good weather, and much improved macroeconomic management. The analysis of poverty shows land ownership, education, type of crops planted, occupations in urban areas, dependency ratios, and location to be important determinants. The characteristics of households that fell into or escaped from poverty are examined; in addition, the profile of those that remained poor during the period (the 'chronic' poor) is looked at. In rural areas, the cultivation of a nontraditional export crop (chat) has significantly improved the welfare of households. Primary education plays a more important role in improving welfare in urban than in rural areas. Decomposition of changes in poverty into growth and redistribution components indicates that potential poverty reduction due to the increase in real per capita income was to some extent counteracted by worsening income distribution. The implications of the results for a propoor policy are discussed.

Keywords: poverty, growth, inequality, Ethiopia, panel data

JEL Classification: I32