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