Economics(PhD)

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Access to Bank Loans, Income Distribution and Economic Growth in agent Based Modeling: Evidence from Evolutionary Perspective
(Addis Ababa University, 2017-06) Atnafu, Gebremeskel; Almas, Heshmati (Prof)
This doctoral dissertation consists of three inter-related studies which constitute its main text, with introductory and summary chapters. The three main studies share a common feature in that they investigate the link between access to bank loans, income distribution and productivity growth. The second chapter is a theoretical framework that uses agent-based computational economics (ACE) to detect the link between access to bank loans and functional income distribution. The third chapter uses Ethiopian firm-level and national income data to validate the second chapter. The fourth chapter investigates the effect of functional income distribution on productivity growth from an evolutionary economic perspective. The second chapter (first study) focuses on Dosi et al.’s (2013) agent-based model which assumes that a well-functioning banking system exists and that industries are composed of both capital and non-capital goods’ producing sectors. As such, monetary policy has a minimal role in impacting functional income distribution leading to an active use of macroeconomic policy. Chapter 2 modifies this model to capture the realities of developing countries where the banking system’s supply of services is smaller than what is considered optimal. The system is heavily influenced by inside agents and industries are dominated by non-capital goods’ producing firms.The modified model theoretically links firms’ access to bank loans and functional income distribution in agent-based modeling. The results based on the modified model indicate that when firms have access to bank loans, functional income distribution improves. Unlike many firm level studies which focus on the firms per se, Chapter 2 argues that it is possible to utilize firms’ economic actions and their access to bank loans to explain how income inequalities are generated and evolve over time. Theoretically the chapter finds that personal income distribution is an emergent phenomenon. This result is in agreement with Thomas Schelling’s ‘Micromotives and Macrobehaviour,’ where he established aggregate behavior as an emergent phenomenon. Its major conclusion is that access to bank loans at the firm level improves income distribution in society. The third chapter (second study) empirically validates the theoretical results obtained in Chapter 2 (first study). It employs the descriptive output and econometric (external as is usually said) validation techniques as an indirect identification strategy to examine the link between access to bank loans and income distribution. It uses data from the Ethiopian Central Statistical Agency (CSA) on medium and large scale manufacturing and national personal income distribution data from the Ethiopian Ministry of Finance and Economic Development (MoFED). Its major conclusions are: (i) firms’ access to bank loans is one mechanism through which income distributional issues can be explained, (ii) firms’ financial structures matter, that is, whatsoever the source of funds, if they are used as investments in fixed capital, the functional income distribution improves, and (iii) functional income distribution is strongly associated with personal income distribution. The chapter will contribute to policy and also enrich the limited literature on the finance-inequality relation. The fourth chapter (third study) links functional income distribution to productivity growth. Its main focus is on examining how functional income distribution can influence the evolution of productivity thereby promoting economic growth. It employs Nelson and winter’s (1982) evolutionary economic framework, evolutionary theory of economic change and the subsequent developments in the field of evolutionary economic modeling. These are used jointly with the evolutionary econometric approach which sees economic growth as an open ended process. The major conclusion of the fourth chapter (third study) is lack of strong evidence of evolution (intra-industry selection) to foster productivity growth and re-allocation (structural change). Thus, the three studies not only shed light on the inter-relationships between access to bank loans, income distribution and productivity growth through a deep analysis of the concepts, theories and their usefulness, but also empirically investigate the nature of their causal relationships and estimate their effects. These two aspects will contribute to the growing literature on ACE.
Essays on Economic Growth, Poverty and Child Educational Performance in Africa
(Addis Ababa University, 2018-11) Kahsay, Berhane; Scott, Hacker (Prof)
This doctoral dissertation consists of an introduction and three independent single-author papers on economic growth, poverty and child educational performance in Africa. The introduction introduces the rest of the chapters and the motivation for studying these aspects and the contributions that the three papers make to existing literature. The dissertation has three standalone papers which were written so that they would eventually be published as separate articles in academic journals. Previous versions of these papers have been published as chapters in three different books published by Palgrave Macmillan, Routledge and Springer. The first paper studies the role of financial development and institutional quality in economic growth in an era of globalization based on the dynamic common correlated effect (DCCE) method in 40 African countries over the period 1980-2014. The overall financial development measure is calculated as an average of indices measuring the extensiveness of financial institutions and financial markets. The financial institutions index includes information on banks, insurance companies and pension and mutual funds, while the financial markets index includes information on stock and bond markets. This paper studies financial depth, access and efficiency of both financial institutions and financial markets. Its empirical findings show that overall financial development had a positive and significant effect on long-term economic growth in the entire sample. However, the effects of financial development in terms of financial depth, access and efficiency and its sub-components on economic growth varied across different levels of economic development and across the two dimensions of financial development -- extensiveness of financial institutions and of financial markets. The second paper analyzes the differentiated relationship between trade liberalization and poverty in 43 African economies over the period 1980-2014. It uses the augmented mean group (AMG) estimator which allows for parameter heterogeneity and cross-sectional dependence in its panel common-factor estimates to avoid biased and inconsistent estimates. Its findings show that generally speaking trade openness had a positive and significant relationship with poverty reduction. However, country-specific empirical results show that the effect of trade openness on poverty varied across countries. This suggests that the effect of trade liberalization on poverty is heterogenous and depends on country-specific trade policy and poverty reduction strategies. The third paper provides a micro-panel analysis of the impact of child nutrition, health and household wealth on children’s educational performance as measured by the Peabody Picture Vocabulary Test (PPVT) score in Ethiopia. The study uses the second and third rounds of longitudinal data from the Young Lives survey in Ethiopia on two cohorts of children. The survey covered 1,792 children aged around 5-years and 444 children aged around 12-years in 2006. The same children were covered in 2009 and are included in my analysis. The results show that the child-nutrition-and-health indicator had a positive and significant effect on child cognitive skills for the younger cohort, while it had an insignificant effect on the older cohort. The study also found that the household wealth index had a positive and significant relationship with children’s educational performance for all ages considered in the study. Furthermore, the findings also show that child labor had a negative effect on a child's academic achievements in the older cohort, and this effect was stronger for girls than it was for boys of similar ages.
Essays on Efficiency and Growth of Ethiopian Air Transport Industry
(A.A.U, 2020-06) Tsegay, Kaleab; Professor Subal, Kumbhakar
This dissertation consists of an introduction and four independent, though related, papers on the growth and performance determinants of Ethiopian air transport and the production efficiency, cost efficiency, and labor use efficiency of Ethiopian airports. This introduction highlights the concept of the dissertation and provides an overview of the aviation sector’s performance including the rationale for the study and the contribution that the four papers make to existing literature on air transport. The four stand-alone studies in this dissertation use different model specifications and estimations for estimating and ranking the performance of the airports. The differences in the airports’ performance are attributed to the objectives of the airports, data availability, and the structure and the model’s underlying assumptions. The aim of the independent studies is being published in academic journals in the field. The first paper uses a cost minimization or input oriented approach for analyzing the cost efficiency of Ethiopian airports using the panel data stochastic frontier approach. It uses the time-invariant fixed effects, time-variant true fixed effects, specifying and estimating the time variant and time invariant approaches in Kumbhakar et al. (2015) and Battese and Coelli’s (1995) models. The empirical findings show international airports have higher passenger volumes and also have lower cost efficiency compared to domestic airports. In other words, maximum cost efficiency was found at airports with low levels of services and facilities as compared to airports with better services and advanced facilities. The findings also show that airports having better infrastructure and airport specific facilities and services will continue to be inefficient compared to 2 those having lower levels of facilities and services. Hence, Ethiopian airports should introduce cost saving approaches based on reliable traffic forecasts. The second paper uses an output maximization or output oriented approach for analyzing the production efficiency of domestic and international Ethiopian airports using the stochastic frontier panel data approach for the period 2002-17. This study examines the technical efficiency of Ethiopian airports over time. It specifies Kumbhakar et al.’s (2014) maximum likelihood method for separating persistent time-invariant inefficiency and transitory time-varying inefficiency from unobservable individual effects. It also applies the fixed effects model and distance technical inefficiency using Battese and Coelli’s (1995) approach for a comparison. The findings indicate that most Ethiopian airports have relatively low technical efficiency which is required for developing competitive strategies that can attract more air traffic volumes and generate higher revenues. Hence, classic customer handling, policy, and incentive schemes should be introduced to increase passenger demand. Private and low-cost carriers should be encouraged to operate using the airports’ services. The third paper uses a factor demand approach and focuses on Ethiopian airports’ labor use efficiency by analyzing this using the panel data stochastic frontier input requirement function. It also specifies the Kumbhakar and Heshmati (1995) model and maximum likelihood estimation techniques of separating persistent time-invariant inefficiency and transitory time-varying inefficiency for estimating labor use efficiency of Ethiopian airports. The findings show that domestic airports are relatively better performing as compared to international airports. Similarly, most airports experience high persistent inefficiencies compared to transitory inefficiencies. This implies a need for taking lessons in the deployment of labor resources and introducing minimum labor requirement standards at all airports. The final paper examines the growth determinants of the Ethiopian air transport sector by testing the variables’ significance and the causality of the three separate but interdependent activity equations covering the period 1988-2018. Ethiopian Airlines’ passenger growth determinants, other airlines’ passenger growth determinants, and the determinants of air freight cargo growth. In this research, ordinary least squares, a seemingly unrelated regression estimation, and autoregressive distributed lag modelling approaches are applied to investigate the short-run and long-run causal 3 relationships between air transport growth and some selected macroeconomic variables. The major findings show that most variables are statistically significant both in the short-run and long-run. Similarly, their respective error correction models are also significant and negative as expected implying strong and significant causal relationships between the short-run and long-run models. The econometric results of some specific variables vary which is attributed to high dependency on imported goods and services, absence of alternative passenger air transport systems, and steadily growing aggregate demand for air transport. Hence, the government should pay due attention to stable macroeconomic growth and airlines should have long-run strategic planning for reducing the effects of any internal and external shocks to the economy.
Essays on Firms’ Growth and their Survival in Ethiopia: The Role of Firm Experience
(A.A.U, 2020-07) Guta, Legesse Tessema; Professor, Almas Heshmati
Firms’ growth, survival, and distribution has been a key research subject in many countries and more so in developing countries because of the limited number of firms and scant evidence on their performance and where they are located in these countries. The nexus between ageing, performance, and survival is important for sustaining the promising and fast-growing Ethiopian economy. This thesis addresses the link between firms’ experience, growth, survival, and distribution using medium and large-scale manufacturing firms in the country. The major data source is the Central Statistical Agency (CSA) of Ethiopia. Data for Chapter 4 comes from the World Bank’s Enterprise Survey database (World Bank, 2015). The thesis applies multiple estimation techniques including system GMM, quantile regression, complementary loglog regression, the Kaplan-Meier survival analysis plots, probit estimation, Heckman selection model, and the fixed effects models. The results of the pooled OLS estimation are reported for a comparison. The studies included in the thesis have some key findings. The findings of the first essay (Chapter 2) on firms’ experience and performance show that experience is positively associated with labor productivity both in the short and in the long run. Firm experience was measured using a composite index developed for this purpose. The sensitivity analysis, however, shows that the positive effect of experience disappears when we estimate the relationship using true panel data. From the elements used in the development of the index, only cohort age and wage rate have a significant positive effect on a firm’s performance. Firms in Ethiopia rely heavily on imported inputs and how this relates to their performance is investigated in the second essay (Chapter 3). Using import intensity as a proxy for firm experience, we found a statistically significant negative effect of import intensity on the risk of exit using a probit estimation. Imported input-intensive firms show a better likelihood of survival using the complementary log-log estimation. Overall, the results from the Kaplan-Meier plots, the complementary log-log, and probit estimations show that importing inputs from abroad is associated with lower risks of a firm’s exiting. In the third essay (Chapter 4), the focus of the analysis shifts to the distribution and determinants of high-growth firms (HGFs). Firm growth distribution and HGFs’ special features is another important aspect of this thesis. The over population of high growth firms in Addis Ababa and Oromia and their unique business challenges are discussed in the third essay. The fourth essay (Chapter 5) examines how ageing is related to a firm’s performance. It complements the first paper which uses pseudo panel data. In Essay 4, we use a true panel of firms and use age as an indicator as opposed to an index in the first essay. After controlling for sample selection using Heckman’s selection model, we observe that there is a no relationship between growth and a firm’s age but there is a convex relationship between size and a firm’s growth rate. Small firms tend to grow faster but there is no significant difference in labor productivity values among firms based on age and size
Essays on International Finance and Economic Growth in Africa
(Addis Ababa University, 2019-06) Addis, Yimer; Scott, Hacker(Prof)
This study attempts to estimate the volume of capital flight from Ethiopia and its determinants, focusing on economic, institutional, and political determinants. Capital flight is estimated at US$ 31 billion over the 1970–2012 period. On average, the country lost around half a billion dollars annually under the ‘Derg’ regime. This amount nearly doubled to US$ 1 billion per annum during the EPRDF regime. The empirical evidence suggests that macroeconomic instability, the degree of financial market deepening, exports, interest rate differentials, political instability, corruption, and debt-creating flows are the most important determinants of capital flight from Ethiopia. The political environment is also found to be crucial. Generally, capital flight was high before violent regime changes and low in the subsequent periods, when regimes were in the process of establishing a firmer grip on power; after this point, however, capital flight began to rise significantly again. The historical analysis points to potential causality running from political factors to capital flight. A strong improvement in economic and political governance will be key to abating the problems of capital flight in Ethiopia.
Essays on Roads, Poverty, and Subjective Well-being in Ethiopia
(A.A.U, 2020-05) Marshal, Negussie Simie; Professor, Kristofer
Poverty is the most pressing and unresolved economic problem in the world. Trying to combat it is natural since its existence embodies the diminution of human capabilities. But what is poverty and how do we identify the poor and the non-poor? What are the extent and trends of poverty? What are the profound effects that roads have on the level and distribution of households’ poverty? How do different measurements of well-being relate to each other in terms of conveying policy implications? This dissertation asks and answers these questions in the context of Ethiopia drawing from Malthusian, welfare, and behavioral definitions of well-being. The dissertation is a composition of three standalone papers. Chapter 1 gives an introduction highlighting the structure, role, and common themes of all the papers. Chapter 2 presents the first paper that analyzes the effects of rural roads on consumption poverty. Chapter 3 covers the second paper that assesses the impact of trunk roads on multidimensional poverty. Chapter 4 gives the third paper that focuses on identifying the effects of multidimensional deprivation on subjective well-being
Essays on the Path to Industrialization in Ethiopia
(A.A.U, 2020-06) Selamawit, G. Kebede; Professor Almas, Heshmati
This study explores the overall performance of the manufacturing sector in Ethiopia over time. It addresses two fundamental research questions: What is the long run impact of manufacturing growth on the Ethiopian economy? and what have been the major explaining factors of Ethiopian manufacturing performance overtime? It uses the endogenous growth theory, specifically the Kaldor growth hypothesis; the heterodox economic approach with a focus on institutions, balanced and unbalanced theories of growth and the public policy endogenous growth theory as theoretical formulations to empirically investigate the research questions. The research covers five independent articles addressing the two major questions using different dataset and estimation approaches. For the time series data, it uses the vector error correction model (VECM), Granger causality, the impulse response function and the autoregressive distributive lag (ARDL) parametric estimation approaches. For cross-sectional data, a non-parametric social accounting matrix (SAM) multiplier analysis is computed. The research also uses industry level panel data for exploring the link between energy use and labor productivity in the manufacturing sector with a dynamic panel estimation approach. The findings show that there is a long run positive relationship between manufacturing and economic growth validating Kaldor’s growth hypothesis in Ethiopia. The empirical analysis of the political economy of industrialization in Ethiopia shows that institutions, especially political institutions, have been one major setback limiting the performance of the manufacturing sector in the country. This shows that the heterodox economic approach with its institutional economic perspective is another framework to better understand the industry and economic structure of Ethiopia. The sectoral linkage analysis shows a weak direct and total linkage of multi-faceted industries with other sectors. Results, suggests that the agriculture-based industry is relevant for Ethiopia with higher output, GDP, demand and income multiplier coefficients. The research further validates the public policy endogenous growth theory in Ethiopia at the industry level, with a significant effect of public policy instruments on Ethiopian industry growth in the long run. The last paper confirms that energy has been other major factor affecting manufacturing productivity in Ethiopia. Yet, the research validates different theories empirically taking Ethiopia as a case study. In a nutshell, the study 5implies a focus should be given to the political economy environment, agriculture-based industries, public policy instruments and efficient energy use to induce industrialization in Ethiopia.
Essays on the Rural Labor Market: Evidence from Ethiopia
(A.A.U, 2023-05-08) Martha Kibru Melese; Professor Johan Klaesson
The aim of this paper is to identify factors influencing labor allocation decisions of adult members of farm households in rural Ethiopia. The analysis is done both at the extensive and intensive margins using a Two-Parts Model (TPM) based on data pooled from the first three waves of the Ethiopian Rural Socio-economic Surveys (ERSS). The results show that labor allocation is influenced by both incentive (pull/push factors) and capacity factors such as education, land size, livestock holdings and non-labor income. Besides, the results suggest gender disparity in the allocation of labor to non-agricultural activities in rural Ethiopia. Female members of farm households are more likely to participate in non-agricultural works, and when they do, they also work more hours than male members. Also, gender differences are observed in some factors that affect labor allocation decisions such as education, number of infants in a household and non-labor income. Therefore, policies that aim at improving efficiency of labor allocation in rural areas should take into consideration differences in responses to various factors that affect decisions of male and female members of farm households.
Examination of Affordability and Adequacy Condominium in Ethiopia: The Case of Addis Ababa City Administration
(A.A.U, 2019-12) Simachew, Mulugeta; Dr. Abate, Sebsebe
The purpose of this study was to examine the affordability and adequacy of condominium housing in Addis Ababa city administration and the basic challenges encountered by the city government of Addis Ababa to supply adequate and affordable housing; to identify the determinants of condominium price in Addis Ababa (using hedonic pricing model) and its association with affordability of housing, assessment of satisfaction of residents and also the adequacy of the condominium housing units as a specific objective. The study considered 430 sample residents using stratified sampling from condominium beneficiaries in 11 rounds. This research used mixed approach and convergent parallel design under the pragmatic paradigm. Qualitative and quantitative data collected from primary and secondary sources using various tools: questionnaires, key informant interviews and different documents. Reliability and validity of the data checked, respectively, using Cronbach‟s alpha and in order to check the validity of the data different comments provided by the immediate supervisor and also other faculty members were incorporated. Combination of qualitative (thematic narrative analysis) and quantitative models (multiple linear regressions) used for data analysis. Based on the data analysis respondents have no similar perception about housing quality and adequacy of condominium housing but they have both positive and negative perceptions by different residents depending on their own culture, age, health condition and also perception and aspiration of the housing beneficiaries. The resident felt that payments expected from the beneficiary is not fair compared with their income generating capacity; additionally it was noted that the beneficiaries have different view about condominium housing project. Residents who have a positive view about the adequacy and affordability of the house stated that physical characteristics of the house, sanitation, privacy, availability of water and electric power and relatively better house and service facilities as compared with the previous residential environment. On the other hand respondents who has negative view about the condominium adequacy indicated that financial restraint (difficult to afford) the house, considering previous location as a better place for the home based business, lack of living experience in multi-story buildings, better social interaction with neighbors in the previous residential areas, structural inconvenience for physically disabled persons, elders, pregnant and children and also the inadequacy of the housing estate for home based business. It is noted that there is a need for government officials, construction and property professionals, sociologists and any other behavioral science professionals to give adequate attention to physical conditions of interior spaces, security of residence, availability of services and social infrastructure and economic infrastructure; privacy and sizes of main activity areas of dwelling in the design, planning, construction and management of public housing projects in the city administration to solve the observed problems in the condominium housing projects. Additionally it was stated that the condominium housing was not affordable by the poor people. Therefore, it is recommended that the housing program must always start from the need assessment related to the preference of the residents on the residential environment, about dwelling unit features as well as the affordability nature of house
The Impact of Foreign Capital Inflows (FCIs) on Economic Growth in Sub-Saharan Africa (SSA)
(Addis Ababa University, 2019-06) Yemane, Michael; Almas, Heshmati (Prof)
This chapter analyzes FDI’s impact on economic growth in SSA countries for which relevant macroeconomic data is available for the period 2001-15. To achieve this, it develops a dynamic system GMM model to capture FDI’s impact on economic growth. It chooses the dynamic panel system GMM because of its superiority over other models in that it takes care of endogeneity problems and alleviates possible biases in the estimation. Besides, it also provides a solution to the problem associated with time-invariant individual heterogeneity, among others. The study includes 43 SSA countries for which data is available. The countries are categorized into ‘resource-rich’ and ‘resource-poor’ using data on their natural resource endowments and other important factors. The study found that there was no meaningful difference in the growth of per capita GDP and in these countries’ ability to attract FDI inflows based on their resource endowments. These findings indicate that FDI had a negative and statistically significant effect on the per capita GDP growth rate in SSA countries in the study period. However, the own lagged value of the growth rate of per capita GDP and gross capital formation, which is used as a proxy for domestic investments and exports, had positive and statistically significant effects on the growth rate of per capita incomes. Though FDI is touted as a catalyst for growth, the empirical findings of this study do not support this claim in SSA. The study provides an explanation for the possible reasons for this divergence from the expected positive effects. It is clear that FDI is not a panacea for the economic malaise in the region and is not contributing to the betterment of lives and welfare. Hence, it is time for SSA governments and policymakers to find out where the problem lies and align policies in a way that make FDI have a more meaningful positive contribution in dragging millions of people out of poverty.
Impacts of Improved Agricultural Technologies Adoption on Multidimensional Welfare Indicators in Rural Ethiopia
(A.A.U, 2020-06) Tsegaye, Mulugeta; Profess Edilegnaw, Wale; Dr. Wassie, Berhanu; Professor Almas, Heshmati; Dr. Zerayehu, Sime
This thesis consists of an introduction, one Co-authored paper and three independent single-author papers. This thesis discusses the importance of improved agricultural technologies and improved practices on multidimensional welfare in Rural Ethiopia. The introduction gives a brief summary of the four papers which form the thesis. In the first stage, a meta-analysis was done to identify the gaps in literature and learn more about the linkages between improved agricultural technologies and welfare. The papers are held together by concepts and theories associated with farm households’ adoption of modern agricultural technologies, linkages between the indicators of multidimensional welfare and technology through an impact analysis in a program evaluation setting and unobservable behavior of the factors in the adoption-welfare context. Chapter 2 (Paper 1) does a meta-analysis of improved agricultural technologies and their impact on welfare in Africa. The meta-analysis considers the results of a study of a sample of 52 empirical estimates that investigated the impact of improved agricultural technologies in Africa with a focus on three key outcomes: output or expenditure, food security, and poverty. The results show that differences in the reported impact of technologies can be attributed to several factors such as data type, model specification, theories, sample size, study area, and journal type. The study also used a test for publication bias and observed no publication bias in general. The next two chapters (Papers 2 and 3) focus on linking multidimensional poverty, food security and child nutrition with improved agricultural technologies. Paper 2 examines the impact of adopting improved agricultural technologies on multidimensional poverty through two powerful impact evaluation techniques--propensity score matching and endogenous switching regression methods--for measuring the causal inference and the Alkire and Foster counting approach for measuring the multidimensional poverty index. The results of the empirical analysis show that adoption of technology reduced overall and living standards’ deprivation scores while there were regional variations in the impact of the technology; a high reduction in deprivation was observed in Amhara region followed by the Oromiya region. Across deprivation groups the impact was higher in the severely deprived households. Paper 3 discusses the impact of improved agricultural technologies on food security and child nutrition using a panel data through a two-ways fixed effect combined with the propensity score matching and endogenous treatment effect techniques. This paper links adoption-nutrition which has been partly neglected by most existing studies. It uses four different outcomes: consumption expenditure, child nutrition, food shortages, and household worries about food availability. The results of the first two outcome variables show that adoption had a significant positive impact while the impact of the remaining two outcomes shows that improved agricultural technologies did not affect welfare. 2 The last paper links improved agricultural technologies to women’s empowerment in the context of impact evaluation relying on a panel data analysis and employing differences-in-differences and propensity score matching techniques in a program evaluation setting. This is a new setting in the agriculture sector. It applies the Abbreviated Women’s Empowerment in Agriculture Index and its two components--five domains of the Empowerment and Gender Parity Index for measuring empowerment. The findings show that technology improved women’s empowerment through five domains of empowerment, but not through the gender parity index, which implies that empowerment is derived more from its five domains.
Industrialization of Economies with Low Manufacturing Base
(Addis Ababa University, 2016-05) Atlaw, Alemu; Borje, Johansson (Prof)
The basic theme of the dissertation is placing structure of economies as an intermediate explanatory factor for attainment of sustained growth of low-income economies that are in transition from stagnant agricultural economy to modern economic growth. The dissertation sets out with conceptualization of a model applicable to structures of low income and under industrialized economies, and hypothesizes on the long term outcomes of these structures. Sustained growth is the result of a particular structure in which manufacturing growth drives economic growth. A structure where transaction services have expanded beyond certain levels stunts manufacturing. Empirical investigations were carried out to test the hypotheses on 35 countries that were low-income economies in 1970.The results provide support for centrality of manufacturing and for the retarding effect of non-optimal growth of transaction services on manufacturing growth.
The Main Determinants of Economic Growth in East Africa: A Panel Approach
(Addis Ababa University, 2019-03) Urgaia, Rissa; Borje, Johansson; Kristofer, Mansson; Sisay, Regassa
This study investigates the determinants of economic growth in East Africa using various types of econometric panel data models and panel wavelet time scaling analysis over the period 1975 ⎼2016. We extend the multivariate panel methods such as autoregressive distributed lags (ARDL) to the bivariate panel wavelet time scaling analyses in order to show the short–run, medium–and long–run effects. Thus the empirical results of multivariate long–run estimations by fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) as well as by random effects(RE) and ARDL(2,1,1,1) methods reveal that both financial sector development(FSD) and foreign direct investment(FDI) have positively significant effects on economic growth in the panel countries. While the vector autoregressive (VAR) model in the transmission channel indicates that human capital resources (HCR) is an important contribution to the development of physical capital stock (PCS) through gross national income (GNI) and vice versa, in the short–term. The bivariate estimations made by wavelet analysis using panel FMOLS shows that as FSD increases there is a decline in the real GDP growth in the medium–term but an increase in the long–term. In the meantime, the bivariate ARDL(1,1) analysis indicates both FDI and GDP growth rate has significantly positive contribution to each other and dynamic inter–temporal causal effects to one another in the short, medium and long–terms. Finally, the obtained results of accumulated responses of GNI to HCR shows that there is a positive significant in the medium–and long–terms but that of HCR to GNI significantly negative in the short–and medium– terms and positively significant in the long–term.
Multidimensional Poverty, Inequality, Vulnerability to Poverty, and Production Factor Risks in Ethiopia
(A.A.U, 2019-12) Getu, Tigre; Professor Sisay, Asefa; Professor Almas, Heshmati; Dr Assefa, Admassie
Measures of income or consumption expenditure-based poverty provide incomplete information and guidelines for addressing poverty. Applying the Alkire-Foster method of a multidimensional poverty analysis using Ethiopian Demographic and Health Survey in this thesis shows that multidimensional poverty is high in Ethiopia in general and in rural Ethiopia in particular. Multidimensional poverty has been decreasing moderately over time, but still large proportions of the population live under multidimensional poverty. Households that are poor at any given point in time may differ from those who are vulnerable to poverty and there should be a distinction between poverty prevention (vulnerability) and poverty alleviation programs. The distribution of vulnerability across different segments of the population is different from the distribution of poverty. Interventions and programs that are targeted at reducing the level of vulnerability in the population therefore need to be targeted differently from those aimed at poverty alleviation. There are also distributional concerns of well-being indicators. Consumption inequalities are higher in urban than in rural areas in the country. Considerable differences in regional consumption inequalities are observed between different regions. Inequalities in the multidimensional indicators decrease over the wealth quintiles while living standard contributes the most to multidimensional inequalities. Reducing inequalities between socioeconomic groups will have a greater impact on reducing poverty than reducing inequalities within groups as between group elasticity is greater than within group elasticity. Parents’ education has a positive impact on children’s education, and educated children have a positive effect on reducing intergenerational inequalities. In rural Ethiopia, production and generation of wealth is highly associated with agricultural productivity and risks in the sector. Risks are inherent in agricultural production. A stochastic production function to estimate variability (risks) indicates that fertilizer and labor are risk decreasing inputs while land is risk increasing input. The more farmers diversify their crops, the less is the yield variability or risks. The risk decreasing/increasing effects of these farm inputs vary by location. Considering risk is important for managing farm risks and thus ensuring food security.
Off-farm Activities, Incomes and Household Welfare in Rural Ethiopia
(A.A.U, 2020-04) Yonatan, Desalegn; Professor Almas, Heshmati
Ethiopia has been a rural and agrarian society in all known history and remains so to this day. A survey of literature shows that the country’s focus has been on agriculture in terms of research interests and development policies. However, these agriculture-based approaches have not delivered on their promises to move rural households out of destitution and poverty. While various alternative growth paths to poverty reduction have been proposed, this dissertation focuses on off-farm economic activities. This dissertation makes the case for off-farm activities in four interlinked papers. This chapter gives a summary of the role played by off-farm participation and income on rural households’ welfare. It motivates the need for studying the relationship between off-farm income generating activities and rural household welfare in developing countries. It gives a unifying theme and an overarching conceptual framework within which the different studies in the dissertation fall. The first of the four papers discusses what drives off-farm participation and incomes. The remaining three papers explore the relationship between off-farm activities and concepts of household welfare – consumption smoothing, multidimensional poverty and vulnerability, and agricultural commercialization. The findings support that off-farm activities are important for rural households’ welfare and development policies should take note of this aspect.
The Role of Livestock in Poverty Reduction among Ethiopian Households
(A.A.U, 2020-07) Jonse, Bane Boka; Pia, Nilsson (Associate Professor); Pär, Sjölander (Professor); Alemu, Mekonnen (Associate Professor)
Farm households in developing countries often face low dietary diversity and high levels of malnutrition as their diets are dominated by a few staple foods. The literature tends to focus on crop diversification to improve diets and welfare of smallholders with less emphasis on the role of livestock diversification on diet variety and quality. Based on the Ethiopian Socio-economic Survey (ESS) and using a fixed effects instrumental variable approach, the current study analyzes the welfare and dietary diversity effects associated with livestock diversification. The findings reveal that livestock diversification and income from sales of livestock and its products play a significant role in improving farm households’ welfare and dietary diversity. Besides, access to markets contributes to variety in households’ diets. Thus, strategies that promote livestock diversification and improve market access could provide a viable pathway to reduce malnutrition and poverty among Ethiopian smallholders
Welfare Implications of Migration, Remittance, and Governance
(A.A.U, 2020-07) Kokeb, G. Giorgis; Professor Par, Sjolander
Migration be it internal or international is intensifying. This is due to globalization and demographic changes in developed and new developing countries. Migration is no longer a male dominated activity. Moreover, studies show that women received a lion share of remittances sent back home. Yet, most migration studies ignore gender perspective in the process and consequences of it. Thus, little is known on the linkages between gender, migration, and source households’ well-being. In the context of Ethiopia this dissertation offers an insight into this aspect of migration. Moreover, from standpoint of governance quality, which is an important global development agenda, this dissertation sheds light on the effect of governance quality on food security in the contest of sub-Saharan Africa (SSA). The first chapter analyzes impacts of migration on households’ farm and off-farm incomes. To this end a panel data set of the World Bank Living Standard Measurement Survey (LSMS) is used. It finds that migration has a positive effect on farm households’ livestock production but no impact on crop incomes. Considering the land size, migration has a negative effect on crop incomes for farmers who own land more than the median land size per capita. Moreover, we found that migration positively affected income generating activities of farm households. Overall, the findings show that households’ heterogeneity needs to be considered for a comprehensive understanding of migration’s impact. Second and third chapters investigate implication of migration and remittances on left-behind households’ welfare from a gender standpoint. The question whether gender matters in the impact of migration motivates these studies. Findings of these studies show that a gender disaggregated framework should be used for comprehensively understanding migration’s impact on the well-being of source families as otherwise the findings are unlikely to be reliable for designing policies for enhancing the positive effects of migration and mitigating the negative ones. Using panel data set the last chapter studies the effects of governance quality on food security in the context of sub-Saharan African countries (SSA). The study found that improving governance quality in SSA contributes positively and significantly to food security.

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