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The Relationship Between Poverty, Inequality, and Growth in the Rural Ethiopia: Micro Evidence

  • Gelaw, Fekadu
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    This paper attempted to analyses the dynamic relationship between the three development objectives: inequality, growth and poverty. Given the vast majority of the population (about 85 percent) is living in the rural area and poverty being higher in rural than in urban Ethiopia, the Government’s focus on rural development can be acceptable if the country is to achieve its poverty reduction targets in near future. Contrary to this, the result of study shows that there has been no promising reduction in poverty in the past. The study used five rounds data collected from 18 rural villages through Ethiopian Rural Household Survey. FTG poverty measures, Gini index and General Entropy classes of inequality measures were calculated. Fixed Effect estimation was made based on 90 observations of indices obtained through decomposition. The estimation results show that a one percent growth would have reduced poverty gap by 3.25 percent, if part of it was not offset by higher inequality resulting a net effects of only 0.6 percent reduction in poverty gap. Growth in the past in the rural Ethiopia was not pro-poor implying that appropriate policy measures need to be taken to reduce the existing inequality.

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    Paper provided by International Association of Agricultural Economists in its series 2009 Conference, August 16-22, 2009, Beijing, China with number 51915.

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    Date of creation: 2009
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    Handle: RePEc:ags:iaae09:51915
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    1. Aghion, Philippe & Caroli, Eve & Garcia-Penalosa, Cecilia, 1999. "Inequality and economic growth: the perspective of the new growth theories," CEPREMAP Working Papers (Couverture Orange) 9908, CEPREMAP.
    2. Deininger, Klaus & Squire, Lyn, 1998. "New ways of looking at old issues: inequality and growth," Journal of Development Economics, Elsevier, vol. 57(2), pages 259-287.
    3. Balisacan, Arsenio M. & Fuwa, Nobuhiko, 2004. "Going beyond Crosscountry Averages: Growth, Inequality and Poverty Reduction in the Philippines," World Development, Elsevier, vol. 32(11), pages 1891-1907, November.
    4. Bruno, Michael & Ravallion, Martin & Squire, Lyn, 1996. "Equity and growth in developing countries : old and new perspectives on the policy issues," Policy Research Working Paper Series 1563, The World Bank.
    5. Barro, Robert J, 2000. " Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    6. Ricardo Fuentes, 2005. "Poverty, Pro-Poor Growth and Simulated Inequality Reduction," Human Development Occasional Papers (1992-2007) HDOCPA-2005-11, Human Development Report Office (HDRO), United Nations Development Programme (UNDP).
    7. Robert J. Barro, 1999. "Inequality, Growth, and Investment," NBER Working Papers 7038, National Bureau of Economic Research, Inc.
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