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Economic reform, growth and the poor: Evidence from rural Ethiopia

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  • Dercon, Stefan

Abstract

Using micro-level panel data from villages in rural Ethiopia, the paper uses standard decompositions of income changes and develops a new decomposition of poverty changes to analyse the determinants of growth and poverty changes during a period of economic reform (1989-95). Consumption grew and poverty fell substantially, but the experience was mixed. I find that common and idiosyncratic shocks mattered, but that the main factors driving income changes are relative price changes, resulting in changes in the returns to land, labour, human capital and location. A regression-based decomposition of the changes in poverty shows that the poor have benefited on average more from the reforms than the non-poor households. But the experience of the poor is mixed: one group of the poor in 1989, with relatively good land, labour and location, outperformed all other households, while another group with much poorer endowments and location experienced virtually unchanged and persistent poverty.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 81 (2006)
Issue (Month): 1 (October)
Pages: 1-24

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Handle: RePEc:eee:deveco:v:81:y:2006:i:1:p:1-24

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References

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  1. Dercon, Stefan & Ayalew, Lulseged, 1995. "Smuggling and supply response: Coffee in Ethiopia," World Development, Elsevier, vol. 23(10), pages 1795-1813, October.
  2. Michael Lokshin & Martin Ravallion, 2000. "Welfare Impacts of the 1998 Financial Crisis in Russia and the Response of the Public Safety Net," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 269-295, July.
  3. Ravallion, Martin, 1990. "Rural Welfare Effects of Food Price Changes under Induced Wage Responses: Theory and Evidence for Bangladesh," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 574-85, July.
  4. Ravallion, Martin & van de Walle, Dominique & Gautam, Madhur, 1995. "Testing a social safety net," Journal of Public Economics, Elsevier, vol. 57(2), pages 175-199, June.
  5. Demery, Lionel & Squire, Lyn, 1996. "Macroeconomic Adjustment and Poverty in Africa: An Emerging Picture," World Bank Research Observer, World Bank Group, vol. 11(1), pages 39-59, February.
  6. Azam, Jean-Paul & Bevan, David & Collier, Paul & Dercon, Stefan & Gunning, Jan & Pradhan, Sanjay, 1995. "Some economic consequences of the transition from civil war to peace," Policy Research Working Paper Series 1392, The World Bank.
  7. Lipton, Michael & Ravallion, Martin, 1993. "Poverty and policy," Policy Research Working Paper Series 1130, The World Bank.
  8. repec:fth:oxesaf:95-5 is not listed on IDEAS
  9. Ravallion, Martin & Datt, Gaurav, 1999. "When is growth pro-poor? Evidence from the diverse experiences of India's states," Policy Research Working Paper Series 2263, The World Bank.
  10. Ravallion, Martin & Bidani, Benu, 1994. "How Robust Is a Poverty Profile?," World Bank Economic Review, World Bank Group, vol. 8(1), pages 75-102, January.
  11. Kakwani, Nanak, 1993. "Statistical Inference in the Measurement of Poverty," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 632-39, November.
  12. Oaxaca, Ronald, 1973. "Male-Female Wage Differentials in Urban Labor Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 14(3), pages 693-709, October.
  13. Datt, Gaurav & Ravallion, Martin, 1992. "Growth and redistribution components of changes in poverty measures : A decomposition with applications to Brazil and India in the 1980s," Journal of Development Economics, Elsevier, vol. 38(2), pages 275-295, April.
  14. Grootaert, Christiaan, 1995. "Structural change and poverty in Africa: A decomposition anakysis for Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 47(2), pages 375-401, August.
  15. Webb, Patrick & von Braun, Joachim & Yohannes, Yisehac, 1992. "Famine in Ethiopia: policy implications of coping failure at national and household levels," Research reports 92, International Food Policy Research Institute (IFPRI).
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Citations

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Cited by:
  1. Bigsten, Arne & Shimeles, Abebe, 2008. "Poverty Transition and Persistence in Ethiopia: 1994-2004," World Development, Elsevier, vol. 36(9), pages 1559-1584, September.
  2. Alem, Yonas, 2014. "Poverty Persistence and Intra-Household Heterogeneity in Occupations: Some Evidence from Ethiopia," Discussion Papers dp-14-05-efd, Resources For the Future.
  3. Ambaye, Guesh Gebremeskel, 2012. "Perception of Poverty by Ethiopian Rural Households: Using a Self Reported approach," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(4), December.
  4. Stefan Dercon & Daniel O. Gilligan & John Hoddinott & Tassew Woldehanna, 2009. "The Impact of Agricultural Extension and Roads on Poverty and Consumption Growth in Fifteen Ethiopian Villages," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1007-1021.
  5. Kacem, Rami Ben Haj, 2012. "Monetary versus non-monetary pro-poor growth: Evidence from rural Ethiopia between 2004 and 2009," Economics Discussion Papers 2012-62, Kiel Institute for the World Economy.
  6. Laura Camfield & Keetie Roelen, 2013. "Household Trajectories in Rural Ethiopia: What Can a Mixed Method Approach Tell Us About the Impact of Poverty on Children?," Social Indicators Research, Springer, vol. 113(2), pages 729-749, September.
  7. Julie Litchfield & Thomas McGregor, 2008. "Poverty in Kagera, Tanzania: Characteristics, Causes and Constraints," PRUS Working Papers 42, Poverty Research Unit at Sussex, University of Sussex.
  8. Ravallion, Martin, 2008. "Are there lessons for africa from China's success against poverty ?," Policy Research Working Paper Series 4463, The World Bank.
  9. Aksoy, M. Ataman & Isik-Dikmelik, Aylin, 2007. "The role of services in rural income : the case of Vietnam," Policy Research Working Paper Series 4180, The World Bank.
  10. Alem, Yonas, 2013. "Poverty Persistence and Intra-Household Heterogeneity in Occupations: Evidence from Urban Ethiopia," Working Papers in Economics 580, University of Gothenburg, Department of Economics.
  11. Isik-Dikmelik, Aylin, 2006. "Trade reforms and welfare : an ex-post decomposition of income in Vietnam," Policy Research Working Paper Series 4049, The World Bank.
  12. Müller, Adrian, 2008. "Clarifying Poverty Decomposition," Proceedings of the German Development Economics Conference, Zurich 2008 30, Verein für Socialpolitik, Research Committee Development Economics.
  13. Pan, Lei & Christiaensen, Luc, 2011. "Who is vouching for the input voucher ? decentralized targeting and elite capture in Tanzania," Policy Research Working Paper Series 5651, The World Bank.
  14. Dercon, Stefan, 2007. "Globalization and Marginalization in Africa: Poverty, Risk, and Vulnerability in Rural Ethiopia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  15. Espen Villanger & Anette Walstad Enes, 2004. "The role of participation and empowerment in income and poverty dynamics in Indonesia 1993-2000," CMI Working Papers WP 2004: 13, CMI (Chr. Michelsen Institute), Bergen, Norway.
  16. Bezu, Sosina & Barrett, Christopher B. & Holden, Stein T., 2010. "Does the nonfarm economy offer pathways for upward mobility? Evidence from a panel data study in Ethiopia," MPRA Paper 35754, University Library of Munich, Germany, revised 2011.
  17. Barbier, Edward B., 2012. "Natural capital, ecological scarcity and rural poverty," Policy Research Working Paper Series 6232, The World Bank.

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