Agricultural Productivity Growth and Its Impact on Household Poverty in Selected Villages in Rural Ethiopia

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Date

2012-05

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Addis Ababa University

Abstract

Poverty is pervasive in rural Ethiopia. The Growth and Transformation Plan stipulated that increasing agricultural productivity of farmers is one entry point for poverty reduction. In this Regard, studying the sources of productivity growth and its implication for poverty reduction is very important for policy making. So far, studies in Ethiopia focused on productivity per se. Other studies on household poverty also paid more attention on the impact of productivity-enhancing factors such as roads and improved agricultural water management technologies on household poverty. However, studies on the impact of productivity growth on poverty reduction are limited. In an attempt to fill this gap, this study analyzed sources of agricultural productivity and its impact on household poverty. Stochastic Frontier Analysis (SFA) was employed to decompose the Malmquist Total Factor Productivity Index using the Ethiopian Rural Household Survey data. The results showed that agricultural TFP grew for the sample households. The analysis further showed that the main source of TFP growth was improvement in technical efficiency. The results also revealed that there is no growth in technology (the state of knowledge) of the farmers that sign ificantly shifts the production frontier upward. Results of Two Stages Least Squares (2SLS) fixed effects regression also indicated that growth in technical efficiency reduces household poverty. Other productivity indicators, land and labor productivity, also reduces household poverty, albeit not as responsive as technical efficiency.

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Keywords

Household Poverty

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