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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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Cited by:
  1. Pan, Lei & Christiaensen, Luc, 2012. "Who is Vouching for the Input Voucher? Decentralized Targeting and Elite Capture in Tanzania," World Development, Elsevier, vol. 40(8), pages 1619-1633.
  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. Ravallion, Martin, 2009. "Are There Lessons for Africa from China's Success Against Poverty?," World Development, Elsevier, vol. 37(2), pages 303-313, February.
  4. 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.
  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. Dercon, Stefan & Gilligan, Daniel O. & Hoddinott, John & Woldehan, Tassew, 2008. "The impact of agricultural extension and roads on poverty and consumption growth in fifteen Ethiopian villages:," IFPRI discussion papers 840, International Food Policy Research Institute (IFPRI).
  7. 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.
  8. 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.
  9. Bezu, Sosina & Barrett, Christopher B. & Holden, Stein T., 2012. "Does the Nonfarm Economy Offer Pathways for Upward Mobility? Evidence from a Panel Data Study in Ethiopia," World Development, Elsevier, vol. 40(8), pages 1634-1646.
  10. Bigsten, Arne & Shimeles, Abebe, 2008. "Poverty Transition and Persistence in Ethiopia: 1994-2004," World Development, Elsevier, vol. 36(9), pages 1559-1584, September.
  11. Stefan Dercon (QEH), . "Globalization and Marginalization in Africa: Poverty, Risk and Vulnerability in rural Ethiopia," QEH Working Papers qehwps147, Queen Elizabeth House, University of Oxford.
  12. 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.
  13. Barbier, Edward B., 2012. "Natural capital, ecological scarcity and rural poverty," Policy Research Working Paper Series 6232, The World Bank.
  14. 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.
  15. 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.
  16. Müller, Adrian, 2008. "Clarifying Poverty Decomposition," Proceedings of the German Development Economics Conference, Zurich 2008 30, Verein für Socialpolitik, Research Committee Development Economics.
  17. 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.

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