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Poverty dynamics in Ethiopia: state dependence

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Author Info

  • Islam, Nizamul

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Shimeles, Abebe

    ()
    (Department of Economics, School of Business, Economics and Law, Göteborg University)

Abstract

This paper focuses on the persistency of poverty in rural and urban households in Ethiopia by estimating dynamic probit models. Unobserved heterogeneity, first order state dependence and serially correlated error component are allowed for. The empirical results for both rural and urban areas show that each of these components is statistically significant in characterising the dynamics of poverty in Ethiopia. Furthermore, risk of poverty increases with the number of household’s size. Moreover, land size is highly correlated (negatively) with that risk of poverty and the most important two cash crops (Coffee and Chat) has significant role in the alleviation of poverty in Ethiopia. Finally, the effect of true state dependence and transitory shocks in poverty persistency appears to be stronger among urban households than rural households.

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File URL: http://hdl.handle.net/2077/4730
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 260.

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Length: 26 pages
Date of creation: 29 Aug 2007
Date of revision:
Handle: RePEc:hhs:gunwpe:0260

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Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: Poverty persistency; State dependence; Unobserved heterogeneity;

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References

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  1. Daniel McFadden, 1987. "A Method of Simulated Moments for Estimation of Discrete Response Models Without Numerical Integration," Working papers 464, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Francesco Devicienti, 2011. "Estimating poverty persistence in Britain," Empirical Economics, Springer, vol. 40(3), pages 657-686, May.
  3. Martin Biewen, 2004. "Measuring State Dependence in Individual Poverty Status: Are there Feedback Effects to Employment Decisions and Household Composition?," Discussion Papers of DIW Berlin 429, DIW Berlin, German Institute for Economic Research.
  4. Stevens, Ann Huff, 1994. "The Dynamics of Poverty Spells: Updating Bane and Ellwood," American Economic Review, American Economic Association, vol. 84(2), pages 34-37, May.
  5. Lee, L.F., 1994. "Simulated Maximum Likelihood Estimation of Dynamic Discrete Choice Statistical Models--Some Monte Carlo Results," Papers 94-06, Michigan - Center for Research on Economic & Social Theory.
  6. Martin Biewen, 2003. "Who Are the Chronic Poor?: Evidence on the Extent and the Composition of Chronic Poverty in Germany," Discussion Papers of DIW Berlin 350, DIW Berlin, German Institute for Economic Research.
  7. Costas Meghir & Edward Whitehouse, 1993. "Labour market transitions and retirement of men in the UK," IFS Working Papers W93/12, Institute for Fiscal Studies.
  8. Dean R. Hyslop, 1999. "State Dependence, Serial Correlation and Heterogeneity in Intertemporal Labor Force Participation of Married Women," Econometrica, Econometric Society, vol. 67(6), pages 1255-1294, November.
  9. Mary Jo Bane & David T. Ellwood, 1986. "Slipping into and out of Poverty: The Dynamics of Spells," Journal of Human Resources, University of Wisconsin Press, vol. 21(1), pages 1-23.
  10. Lorenzo Cappellari & Stephen P. Jenkins, 2002. "Modelling Low Income Transitions," Discussion Papers of DIW Berlin 288, DIW Berlin, German Institute for Economic Research.
  11. Islam, Nizamul, 2005. "Dynamic labour force participation of married women in Sweden," Working Papers in Economics 184, University of Gothenburg, Department of Economics, revised 14 Nov 2005.
  12. Ann Huff Stevens, 1999. "Climbing out of Poverty, Falling Back in: Measuring the Persistence of Poverty Over Multiple Spells," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 557-588.
  13. Francesco Devicienti, 2002. "Poverty persistence in Britain: A multivariate analysis using the BHPS, 1991–1997," Journal of Economics, Springer, vol. 77(1), pages 307-340, December.
  14. Baker, Michael, 1997. "Growth-Rate Heterogeneity and the Covariance Structure of Life-Cycle Earnings," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 338-75, April.
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Cited by:
  1. Frédéric Gaspart & Anne-Claire Thomas, 2012. "Does poverty trap rural Malagasy households?," Working Papers DT/2012/07, DIAL (Développement, Institutions et Mondialisation).
  2. FAYE Ousmane & ISLAM Nizamul & ZULU Eliya, 2011. "Poverty dynamics in Nairobi's slums: testing for true state dependence and heterogeneity effects," CEPS/INSTEAD Working Paper Series 2011-56, CEPS/INSTEAD.
  3. Gaspart, Frédéric & Thomas, Anne-Claire, 2012. "Does poverty trap rural Malagasy households?," Economics Papers from University Paris Dauphine 123456789/10594, Paris Dauphine University.
  4. FUSCO Alessio & ISLAM Nizamul, 2012. "Understanding the drivers of low income transitions in Luxembourg," CEPS/INSTEAD Working Paper Series 2012-31, CEPS/INSTEAD.
  5. Tsehay, Abrham Seyoum & Bauer, Siegfried, 2012. "Poverty Dynamics and Vulnerability: Empirical Evidence from Smallholders in Northern Highlands of Ethiopia," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126873, International Association of Agricultural Economists.
  6. Tsehay, Abrham Seyoum & Bauer, Siegfried, 0. "Poverty and Vulnerability Dynamics: Empirical Evidence from Smallholders in Northern Highlands of Ethiopia," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 51.
  7. Tsehay, Abrham Seyoum & Bauer, Siegfried, 2012. "Poverty Dynamics and Vulnerability: Empirical Evidence from Smallholders in Northern Highlands of Ethiopia," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 126780, Agricultural and Applied Economics Association.

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