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Does the Nonfarm Economy Offer Pathways for Upward Mobility? Evidence from a Panel Data Study in Ethiopia

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  • Bezu, Sosina
  • Barrett, Christopher B.
  • Holden, Stein T.

Abstract

Empirical studies across many developing countries routinely document a positive correlation between participation in rural nonfarm employment and households’ wealth or income. This paper explores whether nonfarm employment leads to higher consumption expenditure growth in Ethiopia. We find that: (1) households’ consumption expenditure growth is positively correlated with the initial share of nonfarm income; (2) the growth elasticity of nonfarm income share is higher for wealthier households; and (3) the main source of growth for nonfarm participants comes from the higher rates of return participants enjoy on their human and physical capital.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:wdevel:v:40:y:2012:i:8:p:1634-1646
    DOI: 10.1016/j.worlddev.2012.04.019
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    More about this item

    Keywords

    rural nonfarm; income dynamics; income diversification; Africa; Ethiopia; impact;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation

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