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Globalization and Marginalization in Africa: Poverty, Risk, and Vulnerability in Rural Ethiopia

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  • Dercon, Stefan

Abstract

Increased openness is seen by some as a panacea for development while for others it is a recipe for disaster for the poor. Using the example of Ethiopia, this paper discusses some of the key challenges faced by some of the poorest African countries in beneficially engaging in the world economy. Worldwide income growth has largely bypassed many African countries, and substantial parts of their populations risk increasing marginalization. This paper documents the challenges faced by one of these countries, Ethiopia, first by highlighting the impact of a first wave of liberalization in the early 1990s, using the evidence from a rural panel dataset. It was found that while liberalization had some positive effects in this particular period, the benefits were largely confined to households with good assets, not least in terms of geography and road infrastructure. Analysis of the subsequent years shows that access to infrastructure seems to have been causing even further growth and poverty divergence within rural Ethiopia. This evidence suggests that access to better infrastructure and communications is crucial to allow households to benefit from further liberalization and engagement with the world economy. Those without good local infrastructure are unlikely to benefit. Finally, some evidence is presented showing that liberalization has shifted the nature of risks faced by households towards a higher incidence of market related risks, such as sudden output price collapses or input price increases. While it is not possible to infer from this that vulnerability to poverty has necessarily increased, one would need to recognize that these shifts in risk require different responses from households themselves and from policymakers.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2007/rp2007-73.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper RP2007/73.

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Length: 26 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:unu:wpaper:rp2007-73

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Keywords: Ethiopia; trade; poverty; growth;

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  1. Paul Collier & Jan Willem Gunning, 1998. "Explaining African economic performance," Economics Series Working Papers WPS/1997-02.2, University of Oxford, Department of Economics.
  2. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  3. Dercon, Stefan, 2004. "Growth and shocks: evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 74(2), pages 309-329, August.
  4. Stefan Dercon, 2001. "Economic Reform, Growth and the Poor: Evidence from Rural Ethiopia," Economics Series Working Papers WPS/2001-08, University of Oxford, Department of Economics.
  5. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  6. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  7. Collier, Paul & Hoeffler, Anke & Pattillo, Catherine, 1999. "Flight capital as a portfolio choice," Policy Research Working Paper Series 2066, The World Bank.
  8. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  9. Dercon, Stefan & Hoddinott, John, 2005. "Livelihoods, growth, and links to market towns in 15 Ethiopian villages," FCND discussion papers 194, International Food Policy Research Institute (IFPRI).
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