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Growth and Shocks: evidence from rural Ethiopia

  • Stefan Dercon

    (Centre for the Study of African Economies)

Using panel data from villages in rural Ethiopia, the paper studies the determinants of consumption growth (1989-97), based on a microgrowth model, controlling for heterogeneity. Consumption grew substantially, but with diverse experiences across villages and individuals. A key focus is on whether shocks affect growth. Rainfall shocks have a substantial impact on consumption growth, and its impact presists for many years. There also appears to be a significant, persistent growth impact from the large-scale famine in the 1980s, as well as substantial externalities from the presence of road infrastructure. The findings related to the persistent effects of rainfall shocks and the famine crisis imply that welfare losses due to the lack of insurance and protection measures are well beyond the welfare cost of short term consumption fluctuations.

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File URL: http://econwpa.repec.org/eps/dev/papers/0409/0409036.pdf
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Paper provided by EconWPA in its series Development and Comp Systems with number 0409036.

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Length: 26 pages
Date of creation: 23 Sep 2004
Date of revision:
Handle: RePEc:wpa:wuwpdc:0409036
Note: Type of Document - pdf; pages: 26
Contact details of provider: Web page: http://econwpa.repec.org

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