Econometrics

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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.
The Impacts of Women's Education on Elements of Reproductive Health and Governance
(A.A.U, 2000-05) Assefa, Daniel; Yoseph, Getachew
The driving argument for conducting this study has come out of the belief that there are multifaceted benefits to investments in education other than the conventional private returns calculation earning differentials. among a wide range of variables that education can presumably exert effects upon, two elements of reproductive health and one element of governance were considered in this study. More specifically this study has committed itself to the investigation of the impacts of education on fertility, contraceptive use and political participation of women. by making use of a primary data from a survey on 1002 women of reproductive age living in urban sides of Addis Ababa and debre berhan estimations were made. the results show that generally education reduced fertility, raised contraception and positively contributed to the political participation of women. It was also proved that as opposed to the conventional wisdom that primary education is enough to exert such influences on t fettility and contraception, the findings showed at least a completion of grade eight schooling was required. /I was also found out that it was women's education and not husband's education that resulted in significant effects on all the three variables. Lastly, most of education's impact especially on fertility came about through the delaying of age at marriage.
Poverty, Access to Finance and Markets in Rural Ethiopia: Empirical Evidence from Coffee Growing Households
(A.A.U, 2009-06) Getachew, Ahmed Abegaz; Dejene, Aredo (PhD)
This paper Iries III eSlahlish Ihe link 11701 access 10 credil and prodllci markels have on Ihe \i'elfclre sl({/IIS or hOllseholds in .lil·e co/lee growing zones o/OrolJlia and SNNP regional sl(l/es. BOlh descripl ive (poverly profile) and regression analysis are employed. II was fa lind 1/70/ {he incidence (d poret!." 11'us./iJlll7d to he r0l11pal11 in the situ/)' area 1\ ';Ih head COlll71 ratio or (Un, a hi( .I'll/oller figllre Ihan Ihe official eslimales or Ihe incidence o(po,'en,' in rllml ({reo s. Whereas .Jill/lila uml IIll1hohllr " 'ere fOllnd 10 he signi/icol7li1' di/j'erel/I F um Wesl Hu/'Urge, Ihis di/ference "'ilh Sidul//o and !lllIhahllr " 'ere n(}f signijicol7I. Access (() credi/lFos ./i17I17" 10 he significal7lly explaining Ihe level o( po"err), in Ihe .\'wnple hOllseholds. Households l\'ho hu\'(! on uccess fO credif ha\'e more prohahililY o(getling o/(f (~r poverty Ihon households 'I'ho don 'I IU/I'e an access 10 ii, Moreover, Ihe ' I'elfclre or hOllseholds wilh nmrer produci /11arke /.\' is heller Ihan Ihe ,,'el/ilre or households hOl'ing disf({nl producI II/urkels, There/in'e, pr01'isiol/ or rllral credil IU Ihese households 'I'ill help Ihem finance ;m'eSfml!n1S (lnd to insure oguinsl risks and Iherehy enhances their \I'e(j"al'C!. J\;/uking markels ' I'ork fill' Ihe poor is imporlanl "e('({{/I'e poor people rei1' on /i)rll'lol and infi)/'/l1ol murkels 10 \'ell Iheir protiIiG/s. rVel/:/ilJ1clioning markets are important in generating gnHFlh lind expanding oJ7porllmi/ies fi)J-/he p()or.
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.
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.
Macroeconomic Determinants of Foreign Direct Investment in Ethiopia: (A Time Series Analysis)
(Addis Ababa University, 2016-06) Fantaye, Yonas; Tufa, Adane (PhD)
This paper gives an analysis on Macroeconomic determinants of Foreign Direct Investment (FDI) in Ethiopia based on a time series data using the period from 1982 to 2014G.C. It is also examines the trend of FDI inflows to the country. The study also discusses why Ethiopia is conducive for Foreign Direct Investment and the area of opportunity. In order to point out the main macro level factors that can highly affect the inflow of FDI in Ethiopia and to know how much these factors affect FDI leading to an oscillating trend. The study took the macro level data in Ethiopia, such as, infrastructure development, potential economic growth, macroeconomic stability, human capital development and Trade openness. In addition, the study gives an extensive account to the theoretical explanation of FDI based on both macro and micro perspectives. Findings show that, in the long run explanatory variable such as infrastructure development, potential economic growth and Trade openness are found positively related and statistically significant while Inflation Rate and Human Capital (illiteracy level) are negatively related and statistically significant. Its parallel with the hypothesis of growing economy attracts more FDI and higher illiteracy level hampers FDI inflows. On the other hand, in the short run tele per 100, Gross Fixed Capital Formation, Openness and Potential Economic Growth become negatively related and they are statistically insignificant where as illiteracy rate and inflation are positively related and statistically significant. . In general, the major implication of this study is that, in Ethiopia foreign direct investment is more determined by sufficient infrastructural activities, higher economic growth, and macroeconomic stability, educated human capital and unrestricted trade in the long run. Hence, in order to increase the inflow of FDI, it is very crucial to concentrate on the mentioned macro economic sectors.
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.
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.
Financial Development And Economic Growth Revisited: Evidence from the Case of Selected Sub-Sahara African Countries
(Addis Ababa University, 2016-06) Getachew, Yohannes; T., Adane (PhD)
The finance – growth nexus, though it is well-entrenched in the academic discourse and no consensus is reached, still begs for updating through revisiting the issue using recent data. With this motivation, this paper has attempted to achieve two paramount objectives: examining the effect of economic growth on the development of the financial system and investigating the effect of other variables which were presumed and simultaneously supported by substantial body of literature to have significant effect on economic growth; a case from 20 selected sub-Sahara African region. Pertaining to this, first using annual data of 20 selected sub-Sahara African countries were collected and transformed in to five years averaged longitudinal data form, we applied multilevel mixed effects regressions (MMER). The results from the mixed effect regression revealed that, there is a significant and positive effect of economic growth, geographic location allotting sea door, macroeconomic stability, investment and domestic savings. On the contrary, negative relationship was observed between foreign legal system origination and financial development. The evidence under the probe on the effect of demographic situations have two effects comprising both direct relationship with financial depth and indirect effects on the efficiency of the financial system. Finally this paper has ended up suggesting further detailed research on the effects of demographic situations on financial development; additionally to examine the finance growth nexus and give microeconomic evidence. Key words: financial depth, efficiency of financial system, economic growth, multilevel mixed effect regression, microeconomic evidence.
The Impact of Foreign Aid on Economic Growth in Ethiopia: Accounting for Transmission Mechanisms
(Addis Ababa University, 2011-05) Birara, Yohannes; Esthepanos, Girma (PhD)
Developing countries in general and Ethiopia in particular has been experiencing huge amount of saving gap, trade gap and fiscal gap for more than four decades. Consequently, there has been a significant net inflow of official development assistance (foreign aid). Therefore, the main objective of the study is to examine the impact of foreign aid on economic growth and the transmission mechanisms (i.e. investment, import and government consumption expenditure) of Ethiopia using Johansson maximum likelihood approach over the period of 1970/1 to 2008/9. The co integration test result indicates the existence of long run relationship among the variables entered in all models. In the long run foreign aid has a positive and significant impact on growth through its significant contribution to investment and import. However, the dynamic short run model points out that aid to have a significant impact on growth it has to be assisted by good monetary, fiscal and trade policy. In addition, in the short run aid has significant impact on government consumption expenditure, which confirms the existence of aid fungibility. The study also confirms the existence of debt overhang problem in the Ethiopian economy. Generally, the theoretical view of the gap models is proven in this study. Aid can enhance growth by financing the three gaps. However to mitigate the problems with aid fungibility and debt overhang problem, foreign aid has to be linked to a good policy framework.
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.
The Impact of Economic Partnership Agreement (EPA) And Counter Fiscal Policy Measures For Ethiopia: A Recursive Dynamic Computable General Equilibrium Model
(Addis Ababa University, 2012-06) Darsene, Yewbdar
As a Growth and Transformation Plan (GTP), the Ethiopian government has planned to conclude the Economic Partnership Agreement (EPA) with European Union (EU) and joining Common Market for Eastern and Southern Africa- Free Trade Area (COMESA-FTA). Thus, in the study we have shown endeavour to examine the economy-wide effects of concluding those agreements. To attain the stated objectives, a recursive dynamic computable general equilibrium (CGE) model is used as an important analytical tool. As a main data base the model is calibrated with an updated version of 2005/06 Social Accounting Matrix (SAM). There were three individual and two combined simulations. According to the simulation results, following tariff reduction, with exception of investment and government income, almost all of the macroeconomic indicators, sectoral output and welfare indicators have shown improvement. Similarly, in the combined simulation, tariff reduction and direct tax rate adjustment, though the percentage of improvement is lower for some variables all of the variables have recorded a positive change. Unlike the above simulations, the simulation combining tariff reduction together with sales tax rate adjustment has shown a negative change in some of macroeconomic indicators, sectoral output and welfare indicators. In concluding, in those simulations which included sales tax rate adjustment has brought adverse effect on most of the economic variables. Therefore, from the welfare point of view, the implication of our study is that, comparing the two compensating measures, it is beneficial to apply direct tax rate adjustment together with tariff reduction.
The Impact of African Growth and Opportunity Act on Sub-Saharan Africa Countries’ Export to the United States of America
(Addis Ababa University, 2011-06) Admasu, Yeshwas; Geda, Alemayehu (PhD)
The African growth and opportunistic act (AGOA) is a US initiative which provides preferential access to Africa’s product in US market since its enactment in 2000. This thesis seeks to assess the impact of AGOA on SSA countries total export to US. For this purpose, a dynamic panel data gravity model with endogenous explanatory variable is used and the generalized method of moment estimators is employed. The estimation is conducted for a panel of 33 AGOA eligible SSA countries over a period of nine years (from 2001 to 2009). The result shows a positive and significant effect of AGOA on overall export of SSA countries to US, but the coefficient is not different from zero. Therefore, the Act is essential for SSA long-term economic growth and poverty reduction. This study recommends the elimination of demand side constraints as well as targeting on the agricultural sector and extending the Act beyond 2015. Keywords: AGOA, Dynamic Panel Data, Export of SSA, Gravity model, GMM estimators, preferential access, and Sub-Saharan Africa and United States
Potential Market Structure, Competition, Liberalization and Trade in Services after Economic Partnership Agreements (EPAs): The Case of Ethiopia
(Addis Ababa University, 2010-06) Fisseha, Yemesrach; Estifanos, Girma (PhD)
The conception of market led international trade as a means to mutual benefits for all engaged bodies is a truth rooted in the invisible hand notion of Adam Smith (1776). Carrying on this 18th century factual understanding of free trade and aiming at realizing the full benefits of international trade, regional and international agreements and negotiations are underway to reduce and eventually eliminate restrictions on free functioning of markets. Among these, Economic Partnership Agreements (EPAs) being negotiated between EU and ACP countries are comprehensive accords attempting to promote free workings of markets. Beyond the common tariff and quota-free understanding of free trade, EPAs include provisions on investment and trade in services with an ultimate aim of creating market-led service industries. As an economy negotiating EPA with EU, potential outcomes of the agreement on the Ethiopian service industries call for assessment. In this regard, this study examines the potential post-EPA competition, trade and investment in three fundamental but restricted service industries of the Ethiopian economy. Based on reviews of CARIFORUM (sates that have completed EPA negotiations) experiences, EPA service provisions, the service industry structures and regulatory framework of the industries in Ethiopia; findings of the study reveal that, aligned with the objective of EPAs, the telecommunications, finance and maritime transport industries of Ethiopia would move towards a competitive industry structure, trade and liberalization for investments in the post-EPA future.
The Relationship between Inflation and Economic Growth in Ethiopia
(Addis Ababa University, 2008-06) Michael, Yemane; Alemu, Tekie (PhD)
It is widely believed that moderate and stable inflation rates promote the development process of a country, and hence economic growth. Moderate inflation supplements the return to savers, enhances investment, and therefore, accelerates economic growth of the country. This paper empirically explores the present relationship between inflation and economic growth in the context of Ethiopia. Using annual date set on real GDP and CPI as well as other variables, for the period 1971 to 2006, an assessment of the empirical evidence has been acquired through the co-integration and error correlation models. Furthermore, it explores an interesting policy issue of what is the threshold level of inflation for the economy. The empirical evidence demonstrates that there exists a statistically significant long-run negative relationship between inflation and economic growth for Ethiopia as indicated by a statistically significant long-run negative relationship between CPI and real GDP. In addition, the estimated threshold model suggests 16 percent as the threshold level (i.e., structural breakpoint) of inflation above which inflation adversely affects economic growth. These results have important policy implications for both domestic policy makers and the development partners working in the country.
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.
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 Impact of Education on Farm and Off-Farm Income in Rural Households of Ethiopia
(Addis Ababa University, 2011-05) Mekonnen, Yalew; Bezu, Sosina (PhD)
This study analyses the impact of education on farm and off- farm income of rural households of Ethiopia. The study is conducted to analyze how education of the household affects the labor allocation and hence the income of the rural households of Ethiopia. Farm household model is constructed to see how farm households allocate their time to farm and off-farm activities. The Seventh round Ethiopian Rural Household Survey data, collected by the School of Economics, Addis Ababa University, in collaboration with other organizations is used for analysis. The labor allocation of the households in to farm and off- farm activities is affected by average education of the household. In addition the household head’s education alone also affects labor allocation of the household. As the households get more education, they reduce labor supply to farm and increase it to off-farm wage employment. The effect of education goes beyond determining labor allocation; it also affects farm and off--farm income. Even though education reduces labor allocation to farm, its overall effect on farm income is positive. This finding suggests that expanding education in rural increases farm income, though it reduces on farm labor supply. Therefore, expansion of education in rural Ethiopia is important to improve farm income and alleviate poverty.
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.

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