Multidimensional Poverty, Inequality, Vulnerability to Poverty, and Production Factor Risks in Ethiopia

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Measures of income or consumption expenditure-based poverty provide incomplete information and guidelines for addressing poverty. Applying the Alkire-Foster method of a multidimensional poverty analysis using Ethiopian Demographic and Health Survey in this thesis shows that multidimensional poverty is high in Ethiopia in general and in rural Ethiopia in particular. Multidimensional poverty has been decreasing moderately over time, but still large proportions of the population live under multidimensional poverty. Households that are poor at any given point in time may differ from those who are vulnerable to poverty and there should be a distinction between poverty prevention (vulnerability) and poverty alleviation programs. The distribution of vulnerability across different segments of the population is different from the distribution of poverty. Interventions and programs that are targeted at reducing the level of vulnerability in the population therefore need to be targeted differently from those aimed at poverty alleviation. There are also distributional concerns of well-being indicators. Consumption inequalities are higher in urban than in rural areas in the country. Considerable differences in regional consumption inequalities are observed between different regions. Inequalities in the multidimensional indicators decrease over the wealth quintiles while living standard contributes the most to multidimensional inequalities. Reducing inequalities between socioeconomic groups will have a greater impact on reducing poverty than reducing inequalities within groups as between group elasticity is greater than within group elasticity. Parents’ education has a positive impact on children’s education, and educated children have a positive effect on reducing intergenerational inequalities. In rural Ethiopia, production and generation of wealth is highly associated with agricultural productivity and risks in the sector. Risks are inherent in agricultural production. A stochastic production function to estimate variability (risks) indicates that fertilizer and labor are risk decreasing inputs while land is risk increasing input. The more farmers diversify their crops, the less is the yield variability or risks. The risk decreasing/increasing effects of these farm inputs vary by location. Considering risk is important for managing farm risks and thus ensuring food security.



Multidimensional poverty, inequality, Input risks JEL Classification Codes