Determinants of Economic Growth in Ethiopia
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Date
2000-06
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A.A.U
Abstract
Following the argument that growth models in developing countries should
be treated in different way from that of the developed).g countries, I tried to
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model economic growth in Ethiopia using data from 1960/61-1998/99.
The dependent variable is real GDP (in logs). The explanatory variables
(factors) used are gross fixed capital formation, labor (population adjusted
for activity rate), human capital index (calculated using gross enrollment
ratio, years of schooling adjusted for return, world technology frontier and
rate of adoption of technology), export, and mean annual rainfall (all in
logs). The analysis makes use of the Johansen maximum likelihood
estimation procedure. The main finding is that growth model in Ethiopia is
best specified by inclusion of non-traditional factors, in this case rainfall
and export. In this co-integration analysis, all the explanatory variables
used with the exception of fixed capital formation are statistically
significant with expected sign. Applying the Vector Error Correction Model
(VECM), it has been found that only rainfall and export among the
variables used for this study are significant in the short-run.
Along with this, a total factor productivity type of method has been used to
determine the contribution of sectors to growth. It has been found that
agriculture has been contributing to growth only half times its share in the
GDP while other sectors have been contributing almost twice their share in
the GDP.
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Keywords
Determinants of Economic, Growth in Ethiopia