Urban Poverty and its Dynamics in Ethiopia: Evidence from Panel Household Survey

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Addis Ababa University


Although there are some empirical researches undertaken on poverty in Ethiopia, there is a need for new researches that make use of recent data set and improved methods. Moreover, little research is done on the variables that affect the dynamics of poverty to understand what determines households to fall into and move out of poverty. Using Ethiopian Socioeconomic Survey (ESS) wave 2 (2013/14) and wave 3 (2015/16) data, this research identified the correlates of poverty, and the factors that determine the movement of households into and out of poverty. To this end, Kripfganz and Schwarz’s sequential (two-stage) regression is used as a primary tool of analysis. The findings from this sequential regression are then compared with two other alternative methods of estimation: Logit Random Effect regression and Logit Fixed Effect regression. The research found that dependency ratio, age of household head and the square of age of head of household are strongly associated with poverty of households. Moreover, it was found that households with illiterate heads have a higher probability of falling into poverty, as compared to the base group of households headed by one with adult and informal education. A multinomial logistic regression undertaken to capture the probability of moving into and out of chronic poverty showed that ownership of nonagricultural business has the tendency to decrease the (relative) probability of a household being chronically poor, rather than move out of poverty. The research finally recommended that the government need to design polices and incentive packages for head of household to get into literacy programs. Family planning scheme should also augment the poverty reduction programs as it reduces the dependency rate. It is also recommended that the government needs to design appropriate entrepreneurial-oriented economic policies and incentive packages that support households to start up businesses.



ESS, Poverty, Poverty dynamics, Urban poverty