Browsing by Author "Mekonnen, Alemu (PhD)"
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Item Analysis of Market Power and Competitiveness of Ethiopian Insurance Industry(Addis Ababa University, 2012-06) Beyene, Shimelis; Mekonnen, Alemu (PhD)Competition in the economy can create a positive prospect for economic growth and development of a country. Competition in Ethiopian financial sector in general and insurance industry in particular should be strong enough for enhancement of efficiency, provision of better service to customers, greater innovation and lower prices thus resulting in improvement of consumers welfare and overall economic growth of the country. Since the introduction of modern financial sector in Ethiopia in 1905, the market structure of insurance industry in Ethiopia is characterized by competition and monopoly depending on the financial policies issued by the ruling governments of the country. This paper studies the existence of market power in the Ethiopian insurance industry during 2001- 2010, using non-structural measures of market power such as market share and Lerner index. And hence insurance market concentration is measured by using Herfindahl-Hirschman Index (HHI) and four largest insurers’ concentration ratio (CR). These measures suggest the existence of market power in insurance industry of Ethiopia and the sector was dominated by the single state owned Ethiopian Insurance Corporation (EIC). The major source of dominance tends towards government regulation that is prohibition of foreign investors in financial sector of the country in general and insurance sector in particular. The study also reveals that Ethiopian insurance market is highly concentrated and the top four insurers holds above 70% of the market share in terms of gross premium, total asset and capital. Key words: market power, market concentration, market dominance, entry barrier.Item Determinants of Private Saving in Ethiopia(Addis Ababa University, 2016-06) Wodamo, Ayele; Mekonnen, Alemu (PhD)Saving is an important instrument to enhance economic growth by providing sufficient funds for investors. However, empirical literature that relates to mobilizing savings in Ethiopia is in broad aggregate forms and almost no work is conducted on determinants of private savings in Ethiopia. For this reason this study empirically investigates the determinants of private saving in Ethiopia by using annual data over the period 1980-2015. Accordingly to identify the factors that affect private savings in Ethiopia the researcher employs ordinary least squaresand error correction models fitted for time series data. The variables examined are real gross domestic product, inflation, government fiscal balance, real deposit rates, current account deficit and financial development indicators. The results indicate that private saving in Ethiopia is a response for variables, real gross domestic product, government fiscal balances, real deposit rate and financial developments but it is not responsive to inflation and current account deficit in the long run. In addition to this granger causality tests indicate that economic growth causes privates savings in Ethiopia which is in line with Keynesian theory, that it is higher economic growth that leads to higher saving.Finally, the study recommends that policy makers or government work to improve income levels of society to address adverse effects on private saving. Likewise the study suggests that fiscal policy should be designed and implemented in a prudent way such that it cannot lead to crowding out private savingItem Determinants of Voluntary Environmentally Sound Technology Adoption and an Assessment of Dynamic Inconsistency in Adoption Decision in Industry in Ethiopia(Addis Ababa University, 2010-06) Tafesse, Bernabas; Mekonnen, Alemu (PhD)The assessment of the determinants of the adoption of ESTs and the reasons for not adopting and continuity are explored in this paper. Towards the first question, four dimensions of possible determinants were identified. The variables that came out as most significant in the adoption decision are the ones pertaining to the plant characteristics of the firm. Specifically, the variables in this category are: the environmental commitment of the firm, the form of ownership of the firm as either foreigner owned or not and its arrangement as being either public or private, the technological capability of the firm, the number of years it has been in operation, and the number of employees. This underlines that the diversity of the firms plays a role in determining the EST option they adopt and thus imply the need for environmental policy to account for the heterogeneity of the firms in its design and implementation. This was done using the ordered probit model following the hierarchical nature of the response variables. Towards the second question, the heckman probit selection model is used and the results explained in the principal agent framework suggest that the form of management, among other things, does come into play in determining whether the firm continues with ESTs or not once they are adopted. This suggests that incentives or more generally the efficiency of mechanism design determines the effective implementation of a venture embarked upon despite the saving potential promised, and in cases savings earned, following the adoption of the ESTs. This implies the need for environmental policy to take into consideration internal management issues for effective realization of the environmental policy objectives drawnItem Economic Analysis of Coffee Certification Scheme in Ethiopia: A Case Study from Oromia Coffee Farmers Cooperative Union(A.A.U, 2009-06) Jotte, Abebe; Mekonnen, Alemu (PhD)This paper looks into the economic analysis of coffee certification scheme in Ethiopia. The study examines and compares per hectare productivity difference between farmers growing organic/ fair trade certified coffee and conventional coffee. Household survey data, conducted in four kebeles at Bullie Horra district targeting Killenso Mokkonisa coffee farmers' cooperative, are reported and analyzed using instrumental variables (two-stage least squares) regression and standard linear difference-in-difference econometric model. In the analysis we find that, controlling for a range of factors, there likely are positive productivity effects per hectare for the treatment group but not for the control group owing to the scheme of coffee certification. This study will have policy implications on how best to design programs to link coffee farmers with the international marketsItem Household’s Willingness to Pay for Solid Waste Management Options: The Case of Yekka Sub City, Addis Ababa,Ethiopia(Addis Ababa University, 2007-07) Tarfasa, Solomon; Mekonnen, Alemu (PhD)A major implication of the pattern of urbanization and rapid population growth in developing countries, like Ethiopia, is expanding adequate infrastructures, waste management service being one of them. However, it seems that this has not been the case in developing countries in general and in Ethiopia in particular. There is a range of solid waste problems, including inadequate waste collection systems, open dumping and other forms of improper final disposal resulting in environmental pollution. The primary objective of this study is to conduct an economic study on demand for municipal solid waste management (SWM) improvements in Yekka-sub city, Addis Ababa, so that the adverse effects of the solid waste in terms of economic, health and environmental impacts may be minimized. In this study an environmental valuation technique – Choice modeling (CM) was employed on 242 randomly selected urban households in Yekka-sub city to estimate the economic values of household’s preferences for improved solid waste management service. This study has obtained estimates of marginal values of improved SWM service attributes and households’ WTP for improved MSW management services. Households on average are willing to pay an additional charge of Birr 12.95 per month for a change in collection frequency form once per week to twice per week or from twice per week to thrice, ceteris paribus, and that households’ net benefit per unit of waste is higher when there is sorting compared with the situation when there is no sorting since they pay less per unit of total waste ((i.e. both the recyclable and the non-recyclable solid waste) when there is sorting relative to what they pay for total waste when there is no sorting, ceteris paribus. In conclusion, households are willing to pay a positive amount of money for solid waste management service, which implies that any policy to bring about efficient solid waste management service in an area needs to include the demand side information should it yield the needed environmental impacts while yielding the needed environmental impacts.Item The Impact of Foreign Direct Investment on Economic Growth: The Case of Ethiopia(2016-06) Dessie, Betelhem; Mekonnen, Alemu (PhD)This paper analyses the impact of foreign direct investment on the economic growth of Ethiopia using Vector Error Correction Model over the period 1981 to 2015. First the study examined the individual growth impact of foreign direct investment. The empirical finding revealed that foreign direct investment has negative significant effect on economic growth in the long run but insignificant effect in the short run. The study examined the causal relationship between foreign direct investment and per capita gross domestic product by using Pairwise Granger causality test. The Pairwise Granger causality test showsthe existence of causal unidirectional relationship from foreign direct investment to per capita gross domestic product. The study also investigates the impact of other macroeconomic variables on per capita gross domestic product. External debt and real effective exchange rate are found to have negative significant effect on per capita gross domestic product in the short run. In the short run, the impact of gross domestic saving on per capita gross domestic product is found to be positive. As that of the first model here also foreign direct investment has negative significant impact on economic growth. The tax incentives provided to foreign investors and the misuse of tax incentives by the investors can be the possible reasons for the negative relationship between foreign direct investment and gross domestic product.Item The Impact of Government Sectoral Expenditure on Economic Growth in Ethiopia: With a Particular focus on Agriculture, Defense, Education and Health Sectors(Addis Ababa University, 2014-06) Berihun, Bazezew; Mekonnen, Alemu (PhD)This paper investigates the growth impact of government sectoral expenditure in Ethiopia over the period from 1975 to 2013, with a particular focus on sectoral expenditures on education, health, agriculture and defense, by estimating a multivariate co-integration and error correction model to examine the marginal effect of expenditure on each sector on economic growth. The study finds that government spending on education has a positive impact on economic growth in the long-run but an insignificant impact in the short-run. Spending on defense has a negative and significant impact on economic growth both in the long-run and in the short-run. Government spending on agriculture is negatively correlated to growth in the long-run but is insignificant in the short-run. Spending on health and the effect of consumer price index is found to be insignificant both in the long-run and the short-run. Thus, the results suggest that the allocation of government expenditure towards the education sector should be favored in order to enhance sustainable economic growthItem The Impact of Public Final Consumption and Investment Spending on Economic Growth in Ethiopia: An Application of Vector Error Correction Model(Addis Ababa University, 2014-06) Abdulaziz, Adnan; Mekonnen, Alemu (PhD)The objective of this paper was to investigate the impact of public sector investment and final consumption expenditure on economic growth using time series data on Ethiopia (for 54 years). In addition, it intended to explore the pattern and relative impact of public and private consumption and investment decision on the economy. I formulate a simple growth accounting model, adapting Ram (1986) in which total government expenditure is disaggregated into expenditure on (physical) investment and final consumption. The analysis is based on time series data covering the period 1960-2014. The study applies the augmented Dickey Fuller test for stationarity and Johansson co-integration test used to determine whether there is a long run relationship between variables. Vector error correction model is applied to estimate both short and long run models related with Real Gross Domestic Product of Ethiopia. The empirical results suggest that in the long run government investments and final consumption has positive and negative effect on economic growth, respectively. Similarly, private investment, private final consumption and primary education enrolment rate have positive effects on economic growth. However, all variables included in the model except government consumption do not have an impact on economic growth in the short runItem Impacts of Climate Change, Variability and Adaptation Strategies on Household Food Security in Southern Ethiopia(Addis Ababa University, 2014-06) Ginbo, Tsegaye; Mekonnen, Alemu (PhD)This study presents an empirical investigation of climate change, variability and adaptation strategies’ impacts on households’ multidimensional food security in rural villages of southern Ethiopia. For this purpose, Two-stage Least Square estimation framework is employed based on cross-sectional data collected from 148 households. Food security index constructed from various indicators representing four dimensions of food security indicates substantial food insecurity problem among sample households. Empirical results reveal that climate change and variability affect households’ food security. Higher temperature and unfavorable rainfall conditions have significant negative impact on household food security. Results also show that education, access to agricultural extension, credit, climate information and market significantly enhance adaptation decisions. Moreover, results confirm that climate adaptation strategies namely soil and water conservation, modern varieties and crop diversification are effective in mitigating climatic risks and ensuring household food security. Consequently, programs enhancing households’ skills, awareness, adaptations decision and farm yield would be helpful.Item Implications of Climate Change and Adaptation Strategies for Household Food Security: Evidence from Panel Data in the Nile Basin of Ethiopia(Addis Ababa University, 2016-11) Seifemichael, Robel; Mekonnen, Alemu (PhD)This study identifies factors that determine decision on adoption of individual/combinations of climate change adaptation strategies. It also investigates whether the type and combination of climate change adaptation practices adopted have significant effect on food security of farm households' and analyzes the possible differences between adopters and non-adopters. The study uses a multinomial endogenous switching regression model of farmers' choice of individual/combinations of climate change adaptation strategies and their impacts on household food security index using panel data collected from 909 farm households in the Nile Basin of Ethiopia. The study has the following three main findings. First, factors that determine the adoption decisions vary across individual/packages of adaptation practices under investigation. Secondly, adoption of climate change adaptation strategies improves the food security of farm households and the highest improvement is achieved when adaptation strategies are adopted in combination rather than in isolation. Lastly, those households who adopt have the advantage of becoming food secure than the non-adopter farm household. Moreover, for farm households who applied the adaptation strategies analyzed, except application of crop rotation in isolation, their food security improved and the likelihood of being food secure increased as farm households adopt practices jointly in their farm plot than adopting in isolation or not adopting at all. Hence, policy makers and other stakeholders should work by promoting the use of combinations of climate change adaptation technologies and also providing households with all the necessary inputs to enhance household food security in the study area. Key Words: Food Security Index, multinomial endogenous switching, Climate Change Adaptation StrategiesItem Market Share, Concentration and Profitability of Ethiopian Leather Industry(Addis Ababa University, 2012-06) Yeshambel, Kumlachew; Mekonnen, Alemu (PhD)Market structure is determined by the entry and exit decisions of individual producers. These decisions are driven by past profit rate and expectations of future profits which, in turn, depend on the nature of competition within the market generally speaking. Profitability is therefore directly dependent on the market structure that the firm has been operating in the defined geographic and product market. There are two influential industrial organization hypotheses that deal with relation between market structure and firms performance. The structure-conduct-performance paradigm believed that firms’ performance is highly related with the existence of concentration which directly leads to collusion among firms in the market and create monopoly power in which all the firms in the industry get monopoly profit. On the other hand, the efficiency hypotheses suggests that firms’ performance is determined by efficiency gain in the market which minimizes costs and expands firms’ market share so that firm with high market share (efficient) will get market power and profit rate to each firm depends on their performance. Based on these classical theories the study examines whether the SCP paradigm or the efficiency structure paradigm determines firm’s performance. The study finds that the structural conduct approach holds true in Ethiopian leather industry. That means, there exists monopoly power in the industry. The concentration ratio proxy for monopoly is significant while the efficiency variable explained by the market share is insignificant. The barrier of market entry and exit is also significant which sustains the monopoly power by avoiding contestability in the domestic market. However the ten year trend of concentration dynamics has been decreasing from 66% to 33%. Thus, if this trend continues the monopoly power may not exist in the near future.Item The Value of Improved Water Supply Service in Motta Town,East Gojjam,Ethiopia:Application of Contingent Valuation Method (CVM)(Addis Ababa University, 2011-06) Bantie, Yibeltal; Mekonnen, Alemu (PhD)Adequate quality, safe and affordable supply of drinking water is a basic need for human life. However, many people in LDCs are lacking this safe and quality water. Since Ethiopia is one of these LDCs its urban and rural area population do not have access to such attributes of water. Therefore adequacy and quality are crucial for household water supply. In this study the CVM was used to analyze the determinants of households’ WTP for improved water services by applying the doublebounded dichotomous choice value elicitation format. The study used cross-sectional data collected from 220 randomly selected sampled households from Motta town. The CV survey responses were analyzed through descriptive and econometric analysis using probit, bi- variate probit and Tobit as empirical models. The CV survey results revealed that 199 (96.6%) of the respondents were willing to pay a positive amount for improved water services. Thus if the proposed water improvement scheme is implemented, in addition to satisfying the water needs of the households, the town’s utility management can collect more revenue from the sale of improved water. The CV survey results also show that the mean WTP of households for the proposed improved water service is between 19.2 cents and 25.83 cents depending on the method used. The total WTP amount from the total of 10,898 households in Motta town was founded to be birr 8,198.2 per day or birr 2,992,343 per year which is much higher than the current total revenue of birr 475,325 collected by the utility management . The results from the test statistics show that existing source of water, initial bid offered to households, age of the respondents, sex of the respondents and responsible organ for the provision of improved water services have a negative effect on the probability of households’ WTP for improved water services in the probit model and at the same time they have also a negative influence on the maximum amount they are willing to pay in the tobit model. On the other hand education (both primary, secondary and tertiary), income, wealth, quality of water being used, reliability of the existing service, years of stay in the town, time taken to fetch water from the existing source and level of satisfaction with the existing service are affecting positively the probability of accepting the initial bid offered to them for improved water service and the maximum amount that they are willing to pay. Therefore the policy makers need to take in to consideration these socio-economic and demographic factors and some other attributes of water in designing the improved water supply system of the town. Key Words: Willingness to pay, Contingent valuation method, Improved Water Service.Item Valuing the Economic Benefit of Ecotourism Areas with Travel Cost and Choice Experiment Methods: A Case Study of Semen Mountain National Park, Ethiopia(2011-06) Yibrie, Ali; Mekonnen, Alemu (PhD)Simen Mountain National Park is one of the most well-known nature based recreational sites due to it‘s an impressive landscape and endemic wild animals. It was established in 1969 and was inscribed in the list of World Heritage sites by UNESCO in 1978. But this park has been in the list of world Heritage in danger since 1996 due to heavy settlement by farmers, declining numbers of Walia ibex, widespread deforestation and continuous reduction in recreational qualities of the site. Furthermore, the site has been unable to improve the qualities of ecotourism experience and expand the types and variety of its recreational services for a long time because of lack of sustainable income from internal sources. Moreover, the value of the park in terms of its recreational service to the society is not known. Thus, there is a need for valuation of the park to know how much value the people attach to the park so as to demonstrate how the site managers can extract revenue out of the excess benefit so as to improve the qualities of the national park and expand the types and variety of the services. These in turn enables to establish a sustainable and efficient level of operations for the maintenance of the park. In doing so, this study used travel cost and choice experiment valuation methods to estimate and analyze the value visitors attach to the park. From the travel cost method, the expected aggregate annual recreational economic benefit gained by visitors of the site is estimated at Birr 48,562,086.4 (approximately US$ 2,943,156.7). While the choice experiment method (CE) was employed to measure visitor‘s valuation of different attributes of the site, and to examine their general perception towards the park‘s services and resources. Three attributes that can explain the park‘s quality (namely, the number of Walia ibex and Ethiopian wolf population, afforestation and additional service to visitors) and one monetary attribute were included in choice experiment. Multinomial and random parameter logit models were used for estimation and from this the marginal willingness to pay and welfare impact of the visitors was estimated. The results of this study indicate that the recreational economic benefit of the park are much larger than what is currently collected by park authorities and thus the park authority can change the current prices of services. Moreover, alleviating the major problems that reduce the quality of the site and supporting improvement and expansion projects are promising for resource users and the management of the park as the visitors are willing to pay to support the plan for the park improvement