Prices and Poverty in Urban Ethiopia

Posted: 25 Jun 2008

Date Written: January 2008

Abstract

Poverty is an ongoing issue in Ethiopia. The identification of policy options to address the problem requires that poverty be measured accurately. One of the most important ingredients in the measurement of poverty is price. The magnitude of poverty is affected by how cost of living differences across time and regions are adjusted. This paper derives a set of price indexes for urban Ethiopia, using data from four household surveys conducted between 1994 and 2000. The results indicate that the cities of Dire Dawa and Mekelle are the two most expensive cities, while Jimma and Bahir Dar are the least expensive. The findings also confirm that poverty is high in urban Ethiopia, with poverty head count of over 40%. Poverty estimates and profile derived using poverty lines as cost of living deflators are similar to those obtained from preferred price indexes developed in the study. However, country-level consumer price indexes, which do not adjust for spatial cost of living differences, may result in misleading estimates and poverty profile. This may have implications for the allocation of resources for poverty alleviation purposes.

Keywords: C43, D12, D60

Suggested Citation

Gebremedhin, Tesfaye Alemayehu and Whelan, Stephen, Prices and Poverty in Urban Ethiopia (January 2008). Journal of African Economies, Vol. 17, No. 1, pp. 1-33, 2008, Available at SSRN: https://ssrn.com/abstract=1151069 or http://dx.doi.org/ejm003

Tesfaye Alemayehu Gebremedhin

affiliation not provided to SSRN

Stephen Whelan (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia
612-9036 9251 (Phone)
612-9351-4341 (Fax)

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