Development Economics

Permanent URI for this collection


Recent Submissions

Now showing 1 - 16 of 16
  • Item
    Macroeconomic, Institutional and political Determinants of Foreign aid Inflows: Evidence from selected sub-Saharan African Countries
    (A.AU., 2023-06-01) Yimer Ali Mekonnen; Abdurezack Hussien (Ph.D)
    Using Blundell and Bond's one-step system GMM after controlling economic variables, this study evaluated the macroeconomic, political, and institutional determinants of the flows of official development in 40 SSA nations for the period 2002-2021. In order to reduce the possibility of multicolinearity and raise the weight of the variables, it calculated a weighted index using principal component analysis from the six governance indicators to quantify political stability and institutional excellence. The study's findings showed that institutional quality, the consumer price index, and lagged value government development assistance have a favorable influence on the flow of aid by 1% level of significant. The flow of government development assistance into SSA nations is also restricted by political stability, GDP per capita, and trade volume by 5%, 1%, and 1% level of significance. The study's policy recommendation is that governments in SSA nations can attract foreign capital by enhancing institutional quality and their ability to increase political stability and citizens' per capita income.
  • Item
    Foreign Direct Investment and Uncertainty: Evidence from Sub-saharan Africa
    (A.A.U, 2021-06) Tarekegn, Getasew; Boka, Jonse Bane (PhD)
    This paper examines how macroeconomic, political, and property rights uncertainties in affecting FDI inflows into sub-Saharan Africa (SSA). The study applies both fixed effect and Arellano-Bond GMM dynamic panel data models for a sample of 26 sub-Saharan Africa countries over the period from 2000 to 2018. The study conducts model diagnostic and stationarity tests to ensure that estimation results are reliable. The findings of the study show that macroeconomic uncertainty as proxied by inflation and exchange rates are negatively related to the inflows of FDI to SSA. Our results also show that property rights uncertainty as proxied by rule of law has a positive effect on FDI inflows while, investment profile has negative effect on FDI inflows to SSA. Similarly, the overall measure of political uncertainty is negatively associated with FDI inflows to SSA. However, internal and external conflict, corruption, and bureaucratic quality have no significant effect on FDI inflows to SSA. Other variables included in the model, such as trade openness, rate of return on capital, and infrastructure, have a positive impact on FDI inflows. The policy implications of the study are that governments in SSA could attract more FDI by minimizing political risks, improving property rights enforcement, and managing key macroeconomic variables like inflation and exchange rate.
  • Item
    The Impact of Pesticides on Maize Production in Southern Ethiopia
    (A.A.U, 2021-06) Yaynie, Yordanos; Araya, Mesele (Dr)
    Maize production is an important economic activity among smallholder farmers in southern Ethiopia, serving as a major source of income and food security. Maize farmers often use pesticides to control pests, but it poses environmental and human health risks. While the productivity of pesticides has been previously studied, most studies treated pesticide as a direct yield enhancing input rather that a damage reducing one. In this study, we analyze the productivity impact of pesticides using a damage control production function. We estimated Cobb-Douglas production functions using Nonlinear Least Square (NLS) and Two Stage Nonlinear Least Square (2SNLS) methods. We use panel datasets collected in 2018 and 2020 in the southern Ethiopia by the Social Sciences and Impact Assessment Unit of the International Centre of Insect Physiology and Ecology (icipe). The results of the NLS regression indicated that pesticides have no significant effect on maize yield. However, when we use the 2SNLS to control for endogeneity of pesticides, the coefficient of pesticides remains positive and statistically significant, indicating that it increases maize yield. The first stage estimated results of the 2SNLS indicates that pesticide use is affected by pesticide prices, contact with extension agents, application of organic fertilizers and the socio-economic characteristics of households. Furthermore, the marginal product of 1 liter of pesticide is found to be 51 kg of maize yield, which indicates that pesticides reduce yield losses due to pests. Calculations of optimal amount of pesticides show that farmers could maximize their profit at an average of 8.4 liters of pesticides. An average quantity above or below this value indicates an overuse or underuse of pesticides. However, this estimate is from the private profit maximizing point of view, but it is important to consider the health and environmental effects of pesticides. To fully understand the societal cost of pesticides, future studies may need to collect data on not only the private benefits, but also the potential costs associated with public health and the environment.
  • Item
    The Relationship Between Inflation and Value of Imports in Ethiopa: An Autoregressive Distributed Lag Approach
    (A.A.U, 2021-06) Tsedeke, Henok; Endale, Kefyalew (Phd)
    Stable price is one of the main goals of any country and it’s considered by governments and policy makers and hence investigating the main cause of inflation is of great importance. Thus, this study aims to examine factors affecting inflation in Ethiopia with a focus on the role of import value of goods and services. An ARDL bound testing model was employed to investigate the relationship using a data covering the years 1981 to 2019. The results reveals that import value to GDP ratio and money growth increases inflation both in the short run and long run; lending interest has an increasing effect in short run but decreases inflation in the long run; official exchange rate, external debt to GDP ratio and growth rate of real GDP have a significant negative effect on general inflation in long run; Whereas external debt to GDP ratio has a negative and insignificant effect on general inflation in the short run. But, growth rate of real domestic product has a negative and significant effect on general inflation in short run. Finally, based on the estimation result, the researcher recommends the concerned body to reduce the severity of inflation in the country. The exchange rate policy should be implemented that will be favorable to reduce the cost of imported capital goods and the government should look inward for supplying of raw materials locally promotes investment in the area where the required raw materials are available locally.
  • Item
    Mobilization of Resources through Taxation in Ethiopia
    (Addis Ababa University, 1985-06) Ghirmay, Teame; Gurmu, Shifferaw (PhD)
    The task of mobi l i zing r esources f or publ ic sector outlays iB a maJor conce rn of e conoml C policy ln Ethi opia. This is es pec i ally t r ue l n postr evolution Ethiopi a , wher e t he soc i c-pol it i cal changes that have taken place have have caused the nat i on t o r e l y heavily on the public sector f or i t s social and economic devel opments . Taxati on i s the pri mary means of mobil izing r esour ces in the country . A str ong tax per f ormance is thus an indispensable condit i on i nor der for t he gove r nment to s t ep up its devel opment expenditur es . The ob j ective of thi s study was to ascer tai n the compat i bili ty of the t ax sys t em wi t h the goal of resource mobili zation. Towards this end the structure of t he t ax r evenue was analysed and its impact on the r evenue r alslng capabili ty of the tax system examined . Mor eover , t he magnitude of t he t f:l.X r evenue r a i sed ,vas eval uated by compar ing it with the t axabl e capacity of t he count ry , and r evenue needs of the gover nment . Final ly~ the t ax effort made l n the past was assessed, and the ~otent i ali ty of the t ax system t o mobi l i ze an increasing share of the nati onal lncome ln the f ut ur e examined. The outcome of the study indicat ed that despite the inc r eased efforts made t o i mpr ove the effectiveness (If the tax system, tax revenue l n Ethi opi a r emalns i nadequate (skimp) , unstable; and in f l exible . The cause of such anomal ous conditions wer e attributed to among others , faulty t ax ploi cy , and weakness i n impliment at i on of the tax laws . It was suggested that a synchronized action both at pol icy and executi on as pect of the taxation pr ocess can impr ove the pe r fo r mance of the t ax system .
  • Item
    An analysis of Government Budget in Ethiopia:With Particular Reference to Government Expenditure 1958-1977(E.C.)
    (A.A.U, 1990-06) Mesghena, Ghirmai; V, Suranyi (dr)
    Among the factors that enable to promote development include a well preformed development plan generating and mobilizing resources proper allocation of these resources, particuarly the allocution of financial resources among investment(capital) and consummation ( recurrent), and an efficient utilization of the meager resources that can be mobilized from external and domoestic sources. In Ethiopia,a tremendous growth in budgetary expenditure has been observed at the same time, this increase in goverrunent expenditure has been going to the recurrent and from it a greater proportion to the non-productive sectors , such as defence and to sustain and run the state machinery. This has been accompenied by a large deficit in the budget of the goverrunent. The objective of this study is to find out the factors that are consideed to be responsible to bring about the tremendous grouth in Government. expenditure and also to assess reasons for the allocation of Government fund among alternative proforemanse To meet this end , stepwise regression analysis is employed. This is further reported by additional analysis of factors like insti titutionsons and procedures in expenditure allocation As the case is in the highly developed and least developed countries , Goverrunent expenditure in Ethiopia also was affected more by non-economic factors. however, different components of expenture behaved differently. Finally various suggestions are forwarded to mitigate the existing mitigate proble. even though recommendations to increase revenue by tax are to be suported, particular consideration should be made on the role of the Government in promoting; socio-economic development and the allocation of expenoiture among alternative programs. The Government can not: continue depending; on foreign sources and defiicitfinancing as the major and permanent sources of financing its expenditure with out causingf'.sover consequences to the over all development of the country
  • Item
    The Problem of Wage Determination in Ethiopia: A Case Study of the State-owned Textile Industries
    (A.A.U, 1986-06) Amha, Wolday; Mulat, Teshome (Dr)
    The objective of this study has been to identify inter' industry and interpersonal wage differential and to explain the determinants of mean wages and individual wares in the state-owned textile industries. The necessary information was obtained through sample survey and secondary sources , The coefficient of variation. simple range, percentages, standard deviation, coefficient of variation, Lorenz curve, Gini efficient, multiple linear and semi- logarithmic regression, and principal component methods were used to analyze the data. The results indicate that 1) the institutional variables such as the government legislations and directives influence the wage determination process in the state-owned textile industries . 2) there exists high inter 'industry and interpersonal wage differential. 3) production, profit and fixed assets jointly affect the mean wage differential between the industries. 4) Education and experience within an industry are increasing function of wages. Moreover, the variables sex, marital status, occupation, experience outside the industry, and change of jobs influence the level of wages in the state"' owned textile industries. The paper suggests for the restructuring of the existing wage system particularly the introduction of wage policy on the needs of the economy not only for the textile sector but also for the whole economy .
  • Item
    The Development of Agricultural Producers' Cooperatives in Ethiopia: Cases from Arsi Region
    (A.A.U, 1989-06) Yirko, Wegenie; Gebre Kiros, Fassil (Dr)
    This thesis is directed at the performance evaluation of the cooperatives sub sector - both at the macro and micro levels- as well as the study of the problems of development of the cooperate vies with a view of making recommendations which may enhance the development of the agricultural sector in general and the cooperative sector in particular . Results indicate that the performance of the cooperative sub sector at the macro level have been less than satisfactory . While the cooperative farms are becoming more and more resource intensive, productive Vities of the main factor s of production, l and labor are declining . This imply a need to counteract against factors which cause the decline . The climatic condition is one nbviou5 cause. The need to counteract the drought condition on the one hand, and the availability huge , labor or, the other then suggests labor investment towards the development of irrigated agriculture. Macro level studies also indicated poor performance of the cooperative sector compiled with the individual and state farms in terms of yield . From the view point of maximizing returns from l and to the society, this suggests retaining land under private holdings than placing them under cooperatives , which in turn may imply a slow rate of growth of t hat sub sector . The performance evaluation of the cooperatives at the micro level was specifically directed at looking in to their allocate efficiency. Towards that end this study was conducted on 26 agricultural producers' cooperatives in Arsi Region . These cooperatives were classified into groups on the bas is of techno logical factors. Representative farms were derived from each group and Linear Programming mode l s were developed for each of the representative farms . comparison of the acute with the optima pattern indicated sub-optimality their cropping pattern,. In all cases results suggested a reallocation of land away from the two basic products of the region. great and barley to other crops . The optimal pattern which was obtained from the computer analysis differed from one typical farm to another - a situation which suggest a differentiated l and use policy. as far as resource use is concerned, l and, in the optimal solution was found to be a limiting factor, in all the cooperatives, whose marginal value product increases with a decrease in land - labor ratio suggesting a need for an appropriate land holding and land allocation policy for each of the cooperatives with takes resource availability of the cooperatives into account. Our study also showed underutilization of plowing labor and ox power. still, however, during this operational of period cooperatives utilize hired tractors. Underutilization/labor and Ox power, on the one hdnd, and the use of harder tractors on the other then implies a need to ovoid hired tractors, which, in turn suggest a need to look into the governments' policy of hiring stat ions. The Optimal solution also showed that weeding, harvesting and/or threshing labor are Limiting for same cooperatives. in these cooperatives, However, there exists abundant unutilized family labor. This then suggest a need to draw policy which will ensure the flow of f family labor into the operations of the cooper actives. in most of the socialistic countries this problem .was resolved by introducing family contract system The study also indicated a number. of problems which hamper the development of cooperatives. one important problems is the input - out put pricing system which creates disincentive on the cooperatives to increase their products . This problem is mainly the result of the Marketing policy of the government which restrict s the cooperatives sale of their produce to the AMC a problem whose solution call for the Introduction of competition the in the of inputs and the. Sale of output. other problems in clued the problem of declining income of Members which cannot cover their expenditure, problems of forced member and absence of democracy in the decision milking process, the solutions of which respectively require untying labor from,1I unnecessary operations of the cooperatives, so that it may create additional income, by introducing the family contract system, establishing the cooperatives in accordance with the principle of voluntarism and enhancing members' participation in the decision making process.
  • Item
    The Impacts of Microfinance Institution on Household’s Livelihood; The Case of Oromia Credit and Saving Share Company and Busa Gonofa Micro Finance Institution of Jeldu Woreda.
    (A.A.U, 2019-10) Jifara, Lemesa; Wassie, Birhanu (PhD)
    The prevalence of poverty has been a common phenomenon in Ethiopia. Microfinance has been introduced and currently it is being practiced in the country as a tool to deliver financial service to the poor with the objective of reducing poverty and improve household livelihood. This paper examines the impacts of microfinance on household livelihood in Jeldu district, Oromia regional state. The study uses cross-sectional data collected from Jeldu woreda households to derive the empirical evidence. Propensity score matching was used for identify the impacts of microfinance intervention on improving the living standard of poor household in comparing client and nonclient household. In this scenario, this paper found that credit has a significant and positive impacts on household average yearly income, consumption, Education, health care, employment generations and housing condition in comparing with non-client respondents. These findings confirm that credit provided for rural household is an effective policy tool to reduce poverty. Therefore, strengthening the existing operation of microfinance in the region would be appropriate socio-economic policy
  • Item
    The Effect of Financial Inclusion on Household Income in Ethiopia
    (Addis Ababa University, 2019-06) Tigist, Birhanu; Tadele, Ferede (PhD)
    Financial inclusion is enabling the delivery of banking services at an affordable cost to the vast sections of disadvantaged and low-income groups. It is becoming a core element in economic growth, development, and poverty alleviation. Based on a nationally representative cross-sectional data from the Ethiopian Socio-economic Survey (ESS) carried out in 2015/16, this paper investigates the effect of financial inclusion on household’s income in Ethiopia. The study employed both descriptive and econometric approaches to data analysis. In the econometric section, Quantile regression and Propensity Score Matching methods have been used in order to control for endogeneity problem that may exist among financial inclusion and income. The finding indicates that access to finance has a significant positive effect on household's income. Financial inclusion has a larger effect on the lower quantiles of household income. The 10th quantile income of financially excluded households is 37 percent lower than financially included households while the top 90th quantile income of financially exclude households is 17percent lower than of financially included households. This shows financial inclusion benefits more low-income households than high-income households, which supports those findings that argue financial inclusion lowers poverty and income inequality.
  • Item
    The Determinants of Public Hospital Visiting Households out of Pocket Healthcare Expenditure in Addis Ababa
    (Addis Ababa University, 2019-06) Selamawit, Tezera; Assefa, Admassie (PhD)
    The sustainable development goals (SDGs) have encouraged governments to facilitate effective mobilization, management and optimal use of financial resources in order to ensure the goals are met and living standard of citizens are improved. The health sector is one of the main sectors that necessitate sustainable investment to achieve Universal Health Coverage and to attain higher standard of living. However when this is not happening, households will be forced to rely on out-of-pocket healthcare spending in order to purchase a good health. A hospital based cross sectional study was conducted in selected public hospitals in Addis Ababa by using outlier robust regression method with the aim of analyzing which socio-economic factors determines household’s out-of-pocket healthcare expenditure. The result of the study shows that income, family age structure, chronic disease, completing primary education and inpatient admission affect out-of-pocket healthcare expenditure positively while household size has a negative association. Therefore, real government’s commitment is required to reduce the huge burden on households by investing, properly planning and implementing quality health services that provide the necessary medicines as well as treatments for groups that are vulnerable to financial burden.
  • Item
    Effects of Nutrition Sensitive Agriculture on Welfare Outcomes of Rural Women: The Case of Basona Worena and Angolela Tera Woredas of North Shoa Zone, Amhara Region, Ethiopia
    (Addis Ababa University, 2019-07) Hanna, Lemma; Hailu, Elias (PhD)
    Food insecurity and malnutrition are priority development challenges of Ethiopia. To counter the problem, the country embraced the nutrition sensitive agriculture approach and taken decisive measures relevant for wide implementation of the practice. Nutrition sensitive agriculture interventions that are implemented in worst affected parts of the country are already producing number of encouraging results. This study assessed the extent to which the desired welfare outcomes are realized in the intervention beneficiary Basona Worena Woreda as compared to the Agolela Tera Woreda that did not benefit from such intervention. Administratively, these woredas are situated in North Shoa Zone of Amhara Region. Purposive and simple random sampling procedures were used to select these two Woredas, and the 262 representative households respectively. The study employed key informants’ interview checklists and structured questionnaires to gather relevant data, which was then analyzed using descriptive statistics and an econometric propensity score matching model. The study findings demonstrated that the intervention has a significant and positive influence on assessed welfare outcomes namely women empowerment, on-farm production and consumption of nutritious diets, household income, and nutrition knowledge. Of the examined women empowerment domains, appreciable improvement was made in leadership and access to resources. Regarding the outcome on production and consumption diversity, mothers’ and children’s consumption was seriously constrained by sociocultural and religious factors. Despite these challenges, intervention beneficiary women and their children have had higher minimum dietary diversity than non-beneficiary women and their children. The home production of nutrient dense food sources positively affected the consumption of these items although extremely poor families opted to sale part or the entire farm produce in order to generate the badly needed cash. To countervail this challenge, future nutrition sensitive agriculture intervention programs should consider livelihood and income diversification opportunities as part of the scheme so as to allow the poor households use the home produced nutrient dense foods for intended purpose. In addition, the sustained and wider dissemination of the nutrition sensitive agriculture approach would require building the capacity of key actors and institutionalizing the scheme in the regular publicly supported extension programs.
  • Item
    Economic Implication of Military Expenditure on Economic Growth: Evidence from Ethiopia
    (Addis Ababa University, 2019-06) Naol, Kebede; Zerayehu, Sime (PhD)
    This study was carried out to empirically examine the policy implication of military expenditure on economic growth in Ethiopia. Although national defense is an important function of government and security from external and internal threats that contributes to economic development, high military expenditures for defense or civil conflicts burden the economy and may impede growth. Thus, the paper was aimed at investigate the empirical economic implication of military expenditure on economic growth of Ethiopia and the paper also examined moderating effects of inflation and unemployment on the relationship between military expenditure and economic growth. The research employed secondary data for the period 1974/5-2017/18. In analyzing the long run and short run relationship between military expenditure and economic growth, Johansen’s co-integration test, VECM, and Granger causality test was applied. Further, forecast Error Variance Decomposition was obtained using the cholesky decomposition of the VECM and used the generalized impulse response function. The study found that military expenditure affect economic growth negatively. The finding showed that there was a unidirectional causality running from economic growth to military expenditure in the long run. From the empirical finding, impulse response function suggested that military expenditure negatively impacts economic growth and Variance Decomposition also revealed that military expenditure has no important impact on future growth rate of output in Ethiopia. The empirical finding also found out that inflation and unemployment have significant moderating effects on the relationship between military expenditure and economic growth in the long run. Finally, this study recommends policy makers to consider the effects of military expenditure and spend more resources on productivity, which is growth enhancing, reducing unemployment, stabilizing inflation as well as foreign exchange market.
  • Item
    Households’ Willingness to Pay for Improved Water Services in Debre-Zeit Town, Ethiopia
    (Addis Ababa University, 2007-08) Fanta, Gossaye; GebreEgzibeher, Tegegne (PhD)
    Water is vital for life. However, many people especially in developing countries have no access to adequate potable water services. In Ethiopia in both urban and rural areas many people do not get safe clean water. The need for clean potable water is high. Debre Zeit town has high water shortage problem. In this study the contingent valuation survey method is employed to analyze households' willingness to pay for the improved water services. In this study survey responses of 234 randomly selected sampled households from all kebeles Debre Zeit town were analyzed through descriptive and econometric analysis. The survey result shows that 99.57% of the survey respondents use pipe water. However, only 10.26% of the respondent satisfied with the status quo level. All survey respondents expressed their willingness to pay above the existing tariff level, though the amount of money they are willing to pay varies from individual to individual. That is, if the improved system is implemented the authorities can collect more money from water sale and at the same time the water need of the households would be satisfied. The survey result also shows that mean willingness to pay for one bucket or for 20 liter of improved water service is 10.2367 and 12.4786 cents according to the dichotomous choice and open-ended survey responses respectively. The total willingness to pay for one bucket or 20 liters of improved water services is 262,781.45 cents or Birr 2,627.82 per day or Birr 959,159.30 per year. Thej Results of both Probit and OLS econometric models show that age, household size, reliability dummy and the income variables influences households’ willingness to pay for the improved water services in the Debre Zeit town. Therefore in designing the improved water supply system for the town policy makers need to take these socio- economic and demographic factors and water attributes into consideration.
  • Item
    Explaining Ethiopia's Foreign Trade Potential: A Dynamic Gravity Approach
    (Addis Ababa University, 2011-06) Gebrehiwot, Gebreyessus; Geda, Alemayehu (PhD)
    Towards improvement of Ethiopia's poor performance in the global trading system, the main objective of this paper is to estimate trade potential of the country with major trade partners around the world. The gravity model of trade has been duly employed for the purpose. For the sake of plausible results, recent innovations of the gravity model are incorporated as well. Specifically, a dynamic gravity approach based on a panel dataset of sample countries was estimated by System GMM estimators to first analyze the pattern of (basic vs export) trade flows. The coefficients obtained are then used to predict the basic trade and export trade potentials for Ethiopia. As a result, we found that the dynamic gravity model fits the data well, indicating the presence of hysteresis in trade. Besides, the traditional gravity variables are all significant with anticipated signs. The last major finding of the study is that considerable part of the country's potential trade has remained unrealized. The magnitude of trade potential was found the highest with Asian, European and then African countries as a continent. The study recommends that export diversification which advances the narrow export dependency, improvement of infrastructure which reduces transaction costs, and bilateral trade negotiations stepping up the current status of the external sector are the necessary steps to exploit Ethiopia's untapped trade potential. Key Words: Dynamic Gravity Approach, Ethiopia, Trade Potential.