Econometrics

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Analysis of Households’ Preferences For improved Solid Waste Management in Adama Town: Application of Choice Modeling
(Addis Ababa University, 2010-11) Berihun, Yonas; Alemu, Tekie (PhD)
In recent years, the generation of solid waste is increasing in Adama town due to rapid urbanization and population growth. Currently, out of the total waste generated in the town about 50-60 % is properly collected and disposed. The remaining amount of the waste is disposed on open spaces, streets and drainage channels along roadsides of the town. This uncollected solid waste in many places of the town may have serious adverse effect on public health and environmental quality. Moreover, the formal dumpsite, located some 8 km away from the center of the town, does not appear to have proper measures to control runoffs from rain fall. Thus, conducting a study on the demand for improved solid waste collection and disposal services is essential. The principal objective of this study is to analyze households’ preferences for improved solid waste management in Adama town. Different solid waste management options are defined by the service attributes of frequency of waste collection from households, separation of waste at source, pollution control measures at the dumpsite and monthly service charge. The study employed the choice modeling technique, which is a stated preference method for the valuation of non-marketed environmental goods and services. The survey was administered on a random sample of 188 households in the town. The data was analyzed using Multinomial Logit and Random Parameter Logit models. The results of the study revealed that improvement in the levels of all the non-monetary attributes of the service increase the utility of respondents. In addition, households with higher monthly total income, larger family size, as well as respondents with higher levels of education favor the improved plans of solid waste management more frequently. Furthermore, households have a positive willingness to pay for improvement in the level of each non-monetary attribute. In conclusion, households in Adama town are willing to pay for improved solid waste collection and disposal services. The implication is that any policy directed towards the provision of effective solid waste management in the town should incorporate demand side information.
Analysis of Off-farm Engagements and Implications for Economic Transformation: Empirical Evidence from Libo Kemkem Woreda
(Addis Ababa University, 2013-06) Asmare, Workineh; Admassi, Assefa( PhD)
Off-farm engagements and earnings from such employment opportunities have become increasingly important in rural Ethiopia as the nation is striving to end poverty through a steadily growing rural income. There is an expressed policy effort to materialize a more stable and growing farm income. However, there is a paucity of policy attention to the off-farm economy notwithstanding its huge potential in diversifying rural income, reducing unemployment and transforming the rural economy. This study analyses offfarm engagements by farm households to drive important implications for policy as farm households’ behavioural choice matters for the desired/undergoing economic transformation. Specifically, we estimate farm households’ propensity to and the intensity of off-farm engagements using binary choice and censored regression models, respectively. We use a survey data of 200 farm households in Libo Kemkem Woreda, Amhara Region. Farm households’ socio-political capital, risk behaviour, financial conditions, characteristics of their farm and local labour market conditions are found to be significant predictors of the choice to off-farm engagements. On the other hand, wagerelated household characteristics and human capital variables appeared less important in explaining farm households’ choice to diversify into the off-farm economy. Likewise, a significant relationship is found between the intensity of off-farm engagements (off-farm days and earnings) and the indicators of socio-political capital, farm characteristics, risk behaviour, financial conditions and labour market conditions. The results imply that offfarm engagements have become permanent pursuits to efficiently husband farm and offfarm income sources of farm households. Thus, the study calls forth a considerable policy attention to the off-farm economy and more robust institutional arrangements to enable farm households exercise informed choices for the desired/undergoing economic transformation in the rural economy to flourish and sustain.
Causality Analysis of Terms of Trade and Economic Growth of Five East African Countries: Vector Auto-regressive Approach
(Addis Ababa University, 2011-07) Ahmed, Yekin; Hasan, Syed (PhD)
This thesis analyses causal linkages between terms of trade and economic growth in five East African countries using annual data for the time period 1980-2009. It also analyses the impacts of openness and financial development on economic growth and terms of trade. To achieve these objectives: unit root (ADF and PP tests), co integration (Johansen’s procedure), and Grangercausality (Wald coefficient restriction test, 2 and F- statistics) are carried out. The results of the unit root tests show that the series of the interest are stationary in first differences. Co-integration and causality between terms of trade and economic growth are tested and compared using two types of bi-variate vector autoregressive models: models without exogenous variables VAR (p), and models with exogenous variables VARX (p, b). The results of co-integration tests on both types of bi-variate models show that two Granger-causality alternative models (VAR in first difference and Error Correction Models) fit for this study. In both types of models, Grangercausality (unidirectional or bidirectional causations) between terms of trade and economic growth are tested using Chi – square and F – statistics from Wald coefficient restriction test: terms of trade causes GDP and GDP causes TOT hypotheses are accepted in all countries investigated more for VARX (p, b) than for VAR(p). Openness, in this study, is found to result in negative growth in Ethiopia, Burundi and Rwanda and in positive growth in Sudan and Kenya; and also found to deteriorate terms of trade of Ethiopia and Rwanda while it has no impact on terms of trade of other countries. The economic growth impact of financial development is positive for Burundi and Kenya whereas, it is negative for Rwanda and insignificant for Ethiopia and Sudan. The terms of trade impact of financial development is positive for Burundi and Kenya, negative for Rwanda and null For Ethiopia and Sudan. This study lends support to export friendly outward and inward oriented policies whose long term impacts are yet to be observed.
Climate Change Adaptation Strategy and Its Effect on Farmers’ Downside Risk Exposure in the Nile Basin of Ethiopia
(Addis Ababa University, 2015-12) Getu, Yechale; Teklewold, Hailemariam (PhD)
This study examines factors determining adoption of AWM (Agricultural Water Management) and the effect of AWM on downside risk exposure of farmers in the Nile Basin of Ethiopia. Moment based specification of farm income function is employed to measure downside risk exposure. We apply an endogenous switching regression approach by modeling AWM and downside risk depending on household and farm characteristics and a set of climatic variables based on geo-referenced historical precipitation and temperature data. Our analysis is based on farm level data collected in 2015. The result indicated that household and farm characteristics, and institutional and climatic factors are the important factors explaining both the adoption of AWM and downside risk exposure. We found that adoption of AWM is more likely under warmer and moisture stress climatic conditions. The result also showed that adaptation to climate change through AWM play a significant and positive role in reducing the downside risk exposure of farm households. It is also found that transitional heterogeneity revealed that farm households who did not adopt AWM would have been benefited more than those who adopted AWM if they did adopt. Equally, farm households who did adopt AWM would have been exposed to downside risk exposure in a higher probability than those who did not adopt if they did not adopt. The finding from this study confirms that adoption of AWM is important for farmers to reduce the likelihood of crop failure. Therefore, the result suggests the adoption and diffusion of AWM in the Nile Basin areas to reduce the probability of crop failure and contract the deleterious effects of climate change.
The Determinant of Aggregate Import Demand in Ethiopia: Co Integration Analysis.
(Addis Ababa University, 2008-06) Otoro, Wubshet; Kassie, Minale (PhD)
In this paper, the determinant of Ethiopia aggregate demand is studies using yearly data in the period 1971/2 to 2006/7. The main objective of the paper is to identify the main determinant of Ethiopia import and the relative elasticity of explanatory variables. The augmented dickey fuller and Phillips Peron test is used to test the unit root test. Johansen co integration and error correction model is employed on yearly data in order to approve the existence of long run relationship and to identify the long run and short run relationship. The main finding is that, in the long run Ethiopia import is mainly affected by real effective exchange rate, real gross domestic product and relative price. It shows elastic import demand with respect to explanatory variables except relative price. The sign of real effective exchange rate is unexpected in the long run. The short run adjustment coefficient is identified and has a correct negative sign; however, most of the coefficients of short run variables are statistically insignificant. The implication of the finding is that, ineffectiveness exchange rate policy in the long run, effectiveness of pricing policy and difficulty of substituting imported goods by domestic product.
Determinants of Capital Flight in Common Market for Eastern and Southern Africa Member Countries: Dynamic Panel Data Analysis
(Addis Ababa University, 2012-06) Haregewoin, Yoseph; Admasse, Assefa( PhD)
Numerous of studies in recent years have focused attention on the determinants of capital flight in the developing countries. This paper contributed to this body of knowledge by filling a noticeable gap. Principally, this paper examines the determinant of capital flight from 13 member countries of COMESA for the period 1990-2009. The paper employed first difference General Method of Momentum (GMM) and system GMM to find out the determinant of capital flight from COMESA member countries. The study found that capital flight has a tendency to persist over time, which may reflect that habit-formation effect or contagion effect. The study also found that Foreign Direct Investment (FDI) has a positive and significant effect which may reflect existence of discriminatory-treatment for domestic investors. Capital flight from COMESA member countries is also fueled by the increase of Gross Domestic Product of the country which may reflect money laundering and a high return for investment in the foreign country particularly in advanced countries. Furthermore the study found that budget deficit has a negative impact on capital flight which may reflect that corrupted government officials are the main actors of capital flight from COMESA member countries. The study suggested the need for the policy makers to adopt an investment policy which doesn’t discriminate foreign investor from the domestic investors, adjusting the domestic interest rate in accordance with the international market and apply tight control on corrupted government officials to repatriate capital flight from COMESA member countries.
Determinants of Child Labor and Schooling in Rural Households of Ethiopia
(Addis Ababa University, 2011-06) Wubale, Tseganesh; Mulat, Teshome (Associate Professor)
Ethiopia is characterized by high incidence of child labour and low school enrollment. There is no specialized body with the primary responsibility of mitigating child labour; even worse, the existing legal provisions about child rights are far from implementation in the rural parts of the country where the vast majority of the children reside and where child labour is pervasive. With the objective of investigating factors that determine child labour and schooling the study adopted a more inclusive definition of child work. Using the seventh round Ethiopian Rural Household Survey data the study adopted multinomial logit (MNL) model to estimate child work-schooling outcomes. The results from the empirical analysis suggest that both economic and sociological factors are important determinants of child labour and school attendance in rural Ethiopia. The main findings from the study are the existence of positive and significant association between child work and number of infants and biological relationship to the household head while age and education level of the household head, household size and average schooling level of the community, among others, having significant but negative effect on child work specialization. The major determinants of school attendance include education level of the household head, eqqub membership of household, average schooling level in the peasant association and distance to school. The finding that some of the variables (number of adults, number of infants, access to loan) affect work-school outcomes differently for boys and girls shows the presence of gender bias. From policy perspective, provision of productive and labour saving assets, instituting saving and credit associations and investment in educational infrastructure should deserve essential place in the move to curb child labour and promote school attendance.
Determinants of Cut-Flower Export Supply of Ethiopia: A Panel Data Evidence
(A.A.U, 2009-06) Getachew, Virga Belete; Dr. Girma, Estiphanos
This study generally aims at investigating the basic factors behind the recent pelformance of Ethiopian cut-flower exports. Efforts are made to check whether factors of production and market and sector-specific incentives affect export supply, and to compute short-run and longrun elasticities. A one way error-component panel data model, based on data of 33 exporting farms from 2005 through 2008, is estimated. Random-, fixed- and between-effects estimators are fit to respectively capture over-all, short-run and long-run determinants and elasticities. The descriptive analysis shows that the recent growth of Ethiopia 's cut-flower exports is notable and can be explained by farms' use of more land under greenhouse cover. The econometric estimations generally reveal that both price and non-price factors explain cut-flower export supply. Land under greenhouse cover is found a strong determinant in all of our estimations. Infrastructure and transportation costs in the short-run and real exchange rates and hired labor in the long-run are additional important factors. All in all, cut-flower export supply is determined significantly by relative prices, land, labor, sector-specific infrastructure and unit costs of transporting flowers to major international markets. Being a foreign investor and association membership do not significantly affect export supply. Coefficients are found elastic for land, infrastructure and transportation costs, and inelastic for others. The results call forth strong efforts to fight inflation; reasonable worker payment, safety and training; continual follow-up of farms for effective and sustainable land use; and adequate infrastructural development.
The Determinants of Export Performance in Ethiopia: A Panel Data Analysis
(Addis Ababa University, 2018-06) Tigist, Alemu; Girma, Estifanos (PhD)
The paper examines the effect of demand and supply side factors on Ethiopia’s export performance. Thus the supply side factors are responsible for poor export performance in the country. The study employed a panel data analysis to empirically analyze these determinants in Ethiopia’sfor the period 2007 to 2017. A sample of ten major trading partners was selected to analyze the determinants of total export. Based the Hausman test fixed effect is appropriate to estimate the model for Ethiopia’s export performance. Using fixed model we found that from the supply side factors GDP, LPI, FDI and REER have insignificant effect for Ethiopia’s export performance while(CPI) institutional quality significantly affects the export performance. Whereas on the demand side the per capita income of the trading partner and trade openness significantly affect the export performance. Thus study concludes that in recent years supply side factors become insignificant for the country export performance and due emphasis should be given for supply capacity to improve the export sector.
Determinants of Gross Domestic Saving: An Empirical Evidence From east Africa
(Addis Ababa University, 2016-06) Gmichael, Weldemariam; Alemu, Tekie (PhD)
The objective of this paper was to investigate the determinants of gross domestic saving in the Ethiopia, Kenya, Mozambique, Rwanda, Tanzania, and Uganda using annual panel datasets form 1991-2012.In this study, effort has been made to identify the fundamental determinants of domestic saving in the region of East Africa using the Fixed Effects (FE) model. Estimated results revealed that GDP per capita growth (gdpp) and degree of urbanization (urb) are the only significant determinants of gross domestic saving in the region. However, inflation rate, working age group as a percentage of total population (py), age dependency ratio to working age (agedp), money and quasi money as a percentage of GDP (m2), and government expenditure as a percentage of GDP (ggov) are found to be not statistically significant at the conventional levels. It seems fairly imperative to suggest that governments should give amplified concern for GDP per capita growth and degree of urbanization more than other candidates if they are in a position to design policies for the sake of boosting up domestic savings. On the other hand, this in turn, may be boosting up sustainable economic growth through encouraging investment over the region of interest. Key Words: Lifecycle/Permanent-income theory; gross domestic saving; panel data, fixed effects; East Africa
Determinants of Profitability in Domestic Banking Markets: - Implications of Foreign Bank Entry.
(Addis Ababa University, 2008-07) Sabir, Nasir; Tesfaye, Mekuria (PhD)
A policy of openness of the domestic banking markets to international bank participation is not a universally accepted argument. While arguments in favor of foreign bank entry are argued to be broad based, there exist a set of concerns with regard to the potentially adverse effects of opening to international involvement. But neither side of these arguments is supported by hard evidence. This paper in the first place attempts to investigate what the determinants of profitability in domestic banking markets are. Afterwards, the implications of foreign bank entry to the profitability of the domestic sector will be analyzed based on the lessons taught from the experiences of the selected East African countries. In order to attempt its objectives the paper employs a dynamic econometric model, which captures the extent of barriers to entry on the profitability of the local sector through the coefficient of the lagged dependent variable (lagged profit). The problem of inconsistency and bias of OLS estimators is handled by application of the Arellano and Bover(1995) GMM estimation method. This method exploits the orthogonality condition that exists between lagged levels and differences in the difference equation and that of instruments of lagged differences and the levels in the original equation. Accordingly, it is found that bank specific variables like equity to total assets, customer and short term funding to total assets, and productivity are highly significant determinants of profitability while the credit risk to total loans and overheads to total assets, though not that significant, they do have an inverse relationship with bank profitability. Furthermore, both the industry specific variables and the macro economic variables are found to be significant determinants. The coefficient of the lagged dependent variable also indicates that the Ethiopian Commercial banking market is not characterized by competitive conditions and profits show a tendency to persist from one year to the other. This implies that, entry of foreign banks will reduce the profitability of the local Commercial banks as international banks exploit their competitive advantages and as they internalize the economic benefit of the knowledge they created, possibly subjecting domestic banks to operate at a reduced rate of return where the issue of their survival may be put in to question. Conclusively, since most of these determinants are highly affected by the quality of management either through its direct or indirect influence, it can be suggested that optimal policies to bank management is the right direction to follow in order to spur progress. Keywords; Bank Profitability, Foreign Bank entry, Bank management, Dynamic panel model, GMM.
Does External Debt Cause Economic Growth? The Case of Ethiopia
(Addis Ababa University, 2014-06) Kassa, Wessene; Guta, Fantu (PhD)
The study examines the long run and short run relationship between external debt and economic growth in Ethiopia over the period of 1970/71-2010/2011 using Autoregressive Distributed Lag Model (ARDLM) or bound testing approach. The empirical results indicated that the relationship between external debt and economic growth both in the short run and long run is significant with a negative sign. This indicates the existence of a debt overhang problem in the country. But, the debt servicing variable has a negative but insignificant effect on economic growth. As a result there is no evidence of crowding out effect since it is not significant. Moreover, there exists unidirectional causality from external debt to economic growth. Therefore, external debt is found to have a negative effect rather than causing economic growth in Ethiopia for the period under study. Hence, in order to tackle the problems of external debt, there should be close monitoring and consistent debt management strategies so as to avoid the misallocation and mismanagement of external debt.
Economic Growth, Capital Accumulation and Stability in Ethiopia.
(A.A.U, 2008-07) Gebremedhin, Zelalem; Estiphanos, Girma (D)
This study tries to investigate the impact of capital accumulation and macro stability on economic growth of Ethiopia taking a series of data range from 1971 to 2006. result of co-integration test using Johanson likelihood approach indicates that all explanatory variables which are entered in the model form long-run equilibrium. the study is also conducted test for weak exogeneity and test for zero restrictions on co-integrating vectors to determine causality relationship and level of significance among equilibrium established variables. the result indicated that real GDP positively and strongly associated with physical capital, but negatively and significantly with budget deficit and political instabilities. The- '"" study could not find strong evidence which supports the existence of macro instability in the long-run other than short-run impact. The existence of war as indicator of political instability, adversely affects real GDP both in the long-run and short-run. In Ethiopia context, physical capital is found to be more important than human capital probably due to lesser human capital are accumulated in the stock.
Economic Impact and Determinants of Export: The Case of Ethiopian Textile and Apparel Industry
(Addis Ababa University, 2010-06) Mesfin, Yared; Mulat, Teshome (PhD)
Ethiopian industrial development policy has put the textile and apparel industry on the forefront position to accelerate the country‟s industrialization process. The availability of huge labour force, the utilization of abundant raw material , the growing demand of this industry‟s product (as the basic human need) and the international goodwill to provide preferential and differential market access to this industry help the sector to play a significant role on the development of the country‟s economy and on mitigation of poverty. This paper examines the economic impact of textile and apparel industry, the utilization of preferential and differential market access and the determinants of the export performance. The descriptive analysis covers the period 1999 to 2009. The result of the descriptive analysis reveals that the economic impact and the preferential market utilization of the textile and apparel industry are very limited. The time series econometric analysis covering the period 1971/72 to 2008/09 employed Eviews 5 (a computer program as a tool for econometric analysis). The econometric analysis result shows that labour cost and trade openness (liberalization) have positive impact on the export performance of the sector, whereas cotton export and exchange rate have negative impact. As this study tries to indicate, the government supports only those who engage themselves on export market. However, this is not satisfactory and successful for the sector‟s development. So one of the major conclusions of this study is that unless the government revises its policy direction towards developing and supporting the sector (boost the sector investments), the current “artificial” export growth of the industry will be short-lived and ultimately results in unsustainable export growth.
The Economy Wide Impact of Comesa FTA on Ethiopia: A Recursive Dynamic CGE Model
(Addis Ababa University, 2011-06) Mindaye, Mussie; Guta, Fantu (PhD)
This study examines the economy wide impact of COMESA FTA on Ethiopia. The analysis is made based on Ethiopian social accounting matrix (SAM) of 2005/06 constructed by EDRI. The study has utilized a recursive dynamic CGE model. The model is simulated for an import tariff reduction on different sectors using three different scenarios. The main findings of the analysis are: in the first scenario, removal of import tariff on agriculture and non agricultural sector results in an increase of consumption expenditure of households, commodity output and GDP. On the other hand, government revenue, price of import and price of export declined. Moreover, domestic activity has mixed outcomes. There is some trade creation but no trade diversion effects induced by the tariff reduction. . Mean while, under the second scenario removal of import tariff on agriculture sector only has no impact on Ethiopian economy. Furthermore, the removal of import tariff from non agricultural sector in the third scenario is resulted in similar outcomes as that of the first scenario. Key word: Recursive dynamic CGE model, COMESA FTA, import tariff reduction, Ethiopia.
The Effect of Climate Change Induced Productivity Change On Food Security and Food Market of Ethiopia: CGE Modeling
(Addis Ababa University, 2012-06) Kebede, Wondmunegn; Berhanu, Wassie (PhD)
Ethiopia is known as food insufficient country. It depends mainly on its agricultural sector for food production which is rainfall dependent. The performance of this sector has remained low mainly because of recurrent drought inherently happened as a result of climate change. Owing to the variability of the rainfall and temperature in the country, Climate change is anticipated to have an impact on the productivity of the agricultural sector. The thesis is therefore simulates the effect of climate change induced agricultural productivity change on food security and food market of Ethiopia. A recursive dynamic CGE model is used with three climate scenarios (CGCM2, PCM and HadCM3). In the finding, it is revealed that food availability problem is stressed from a decline in per capita food production with negative yield growth elasticity and an increase in food supply price under climate change. In addition, food access problem is also hassled with a reduction in per capita income and per capita food consumption expenditure. In a nutshell, food poverty is intensified from general welfare loss under climate change. The HadCM3 climate projection provides the worst scenario followed by the CGCM2 climate forecasting. It has generalized that climate change will be the main challenge to the future on the food security problem of Ethiopia. Finally, the paper recommended that climate change adaptation is required to create resilience capacity; diversification of the income source for both the rural and urban households and improving the farming technology and practice is suggested. It is also required to expand farm irrigation, develop road infrastructure, establishing efficient climate forecasting and communication technology, and improving market efficiency.
An Empirical Investigation of the Aid - Growth Relationship in Ethiopia
(Addis Ababa University, 2003-07) Tefera, Wondwosen; Ageba, Gebrehiwot (PhD)
The objective of this study is to assess the relationship between aid, policies and economic growth in Ethiopia for the period 1962/63 to 2001/02. The analysis is conducted using the Johansen Maximum Likelihood Procedure. The main findings of the empirical investigation are: Foreign aid has a significant positive contribution to investment, whereas uncertainty of aid flow (as a result of aid volatility) significantly and negatively affects the capital formation activity. The effect of foreign aid on economic growth appeared negative but insignificant. Aid interacted policy term, on the other hand, produced significantly positive result. The result further points out that good economic policies increase the level of foreign aid that can be productively consumed. The Error Correction Model (ECM) conclude that foreign aid is insignificant in the short run. Furthermore, the causality test shows that the causality runs from policies to foreign aid while the converse does not hold.
An Empirical Time Series Analysis on the Determinants of Gross National Saving in Ethiopia: ARDL Approach to Co-Integration
(Addis Ababa University, 2014-06) Ghebru, Yohannes; Guta, Fantu (PhD)
The objective of this paper was to investigate the macroeconomic determinants of gross national saving in Ethiopia using time series annual data form 1970/71-2010/11. In this study, effort has been made to identify the long run and short run determinants of national saving in Ethiopia using an ARDL bounds testing approach and ECM to capture both short run and long run relationships. Estimated results revealed that financial development (FD) and Current account deficit (CAD) are significant determinants of gross national saving in Ethiopia in the long run. But gross national disposable income (LGNDI), dependency ratio (DR), budget deficit (BD) and inflation, approximated by consumer price index (CPI), found to be statistically insignificant determinants of gross national saving in Ethiopia in the long run. However, in the short run, except consumer price index (CPI) and dependency ratio (DR) the rest of the explanatory variables such as gross national disposable income (LGNDI), financial development (FD), current account deficit (CAD) and budget deficit (BD) found to have statistically significant meaning in explaining gross national saving in Ethiopia. The speed of adjustment has value 0.66978 with negative sign, which showed the convergence of saving model towards long run equilibrium. The overall findings of the study underlined the importance of raising the level of income in a sustainable manner, minimizing the adverse impacts of budget deficit and inflation rate and creating competitive environment in the financial sector.
Estimating Household Energy Demand of Rural Ethiopia Using an Almost Ideal Demand System (Aids)
(Addis Ababa University, 2008-06) Diriba, Dawit; Yesuf, Mahmud (PhD)
The paper attempts to estimate household energy demand (fuel choice) using panel data for different sources of energy consumption. The study contributes to the contemporary literature a coherent view of energy demand (fuel choice) in rural setup. The result of the finding suggests that as household’s total expenditure rises, fuel option widens and fuel mix may change. They respond by increasing the number of the fuel they use exhibiting fuel stacking (multiple fuel use) behavior but traditional/inferior fuels are rarely entirely excluded from household energy mix. It also suggests that households do not simply substitute one fuel for another due only to income or expenditure increases, rather diversify their fuel consumption in a process of fuel stacking. To envisage this issue deeply the study used econometric tool of the linear approximation almost ideal demand system (LAAIDS) with normalized prices to compute expenditure elasticities and the multinomial logit model of household fuel choice behavior. The fuel stacking (energy mix) model is based on the fact that in any point in time, rural households use multiple sources of energy. Households make inter fuel switch and inter fuel substitution in optimizing their energy mix by adopting multiple fuel use (fuel stacking) strategy in response to income or expenditure change; rather than completely transiting to consumption of new fuels as the energy ladder hypothesis suggests. To prove this, we computed the expenditure or income elasticities of demand for inferior fuels and advanced fuels. The result of the study, that demand is expenditure elastic for advanced fuels and expenditure inelastic for inferior fuels provides solid and consistent argument/evidence to the economic literature that despite the income constraints, households prefer the normal good (advanced fuels) to the inferior goods (traditional fuels). Furthermore, the study used multinomial logit estimate of the determinants of household choice between inferior fuels, advanced fuels and mix of the two fuels to scrutinize the fuel stacking(multiple fuel use) behavior of households in the energy mix model. Our result indicates that household’s total expenditure, the fact that the household is female headed, total land owned by household (holding size), total number of livestock owned by household and family size square as predictor have positive coefficients of parameter estimate. This implies that the likelihood of household’s choosing traditional/inferior fuels or mix of inferior and advanced fuels (except total number of livestock owned) away from advanced fuels increases with increment in these predictors. However, family size, education of household head, age of household head, time spent on fuel collection and expenditure on advanced fuels have negative parameter estimates. This indicates that it is less likely that households choose inferior fuel or mix of inferior and advanced fuels compared to advanced fuel with increase in these variables as predictors. Our result indicates that fuel stacking or multiple fuel use is a more applicable hypothesis for rural households of Ethiopia than the simplistic energy ladder hypothesis. In rural areas, however, energy choice of household is constrained by lack of access to commercial fuels, energy using equipments and appliances, energy supply dependency and affordability as well as consumer preferences and tastes. Therefore, rural households have less potential for fuel switching due to the aforementioned factors and the existence of fuel wood which is gathered without any financial payment.
Exports and Economic Growth in Ethiopia: an Empirical Investigation
(Addis Ababa University, 2002-06) Gemechu, Debel; Estifanos, Girma (PhD)
This study investigated the effect of exports on economic growth in Ethiopia for the period 1960/61-2000/01. The study aimed to review the policies undertaken by the different regimes in relation to export policies, and to empirically test the relationship between exports and economic growth using different techniques. In addition, attempts were also made to examine the supply (structural) constraints to export growth in Ethiopia. To test the export-economic growth relationship, in addition to using the frameworks that have been followed by most of the previous studies, an extension to the previous studies was made by introducing cointegration and error correction approaches in the regression analysis. Furthermore, a simultaneous equation model and the Granger causality test were conducted to examine the indirect effects of export on economic growth and to address a possible simultaneity problem that may arise because of the correlation between export and economic growth. The results from the cointegration and error correction models revealed that export significantly affected economic growth in the short run. In addition to its direct effect, export is also found to indirectly affect economic growth as evidenced from the simultaneous equation models. Furthermore, the causality test conducted indicated that causality runs from exports to economic growth. The key finding in this study is that export growth positively and significantly affected economic growth and the result is not sensitive to the methodologies used.

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