Rural household poverty dynamics in Northern Ethiopia 1997-2000. Analysis of determinants of poverty

Abstract

The incidence of poverty, in spite of a 5 percent increase between 1997 and 2000, has significantly remained the same. There is, however, a moderate but significant decrease in the depth and severity of poverty perhaps pointing to the positive impact of policy reform in the region. Decomposition results indicate that there are significant differences in the geographic distribution of poverty. Moreover, zones with initially highest level of poverty remained so during the period perhaps indicating the presence of a geographic trap to poverty. The analysis of the dynamics of poverty indicated that the proportion of the people falling into poverty was far higher than those escaping poverty, and people found initially in extreme poverty are found to have difficulty of moving out of poverty. This underlines the chronic nature of poverty in the region and the need for longer-term investments in the poor while supporting those temporarily falling into poverty. In the analysis of the determinants of poverty, human capital resources such as members with primary and secondary education and households educated heads and with any kind of acquired skills were found to have higher welfare. Increased physical asset endowments, in terms of farm size and livestock holding, are also positively related to improved household welfare. These results underline the importance of enhancing the poor's human and physical endowments in poverty reduction. On the other hand, household labour endowment seems not to have generally contributed to improvement in welfare perhaps underlining the poor functioning of labour markets in the region. This calls for policy measures that attack poverty through increased investment for employment creation to tap on the existing idle labour resource. Households' access to services was not found to have a significant effect on welfare perhaps pointing to the limited effect of these programs on poverty reduction in a remote, socially unstable and fragile environment. Finally, regression results also show the adverse effects of village level variables such as political risk (war) and weather factors underlining the importance of peace and political stability and investments in irrigation in poverty reduction. Better access to markets, through investments in marketing infrastructure may also contribute to poverty reduction, although it may leave poor households vulnerable to external shocks until they are fully integrated into the market