The paper implements simultaneous random effect models as a means to analyse causality issues related\ud to poverty and fertility in Ethiopia, a country which is plagued by high and persistent poverty and very\ud high fertility rates in rural areas. Using longitudinal data from both urban and rural areas of Ethiopia,\ud we analyse the relationship between childbearing and poverty. In addition to identifying state\ud dependence in poverty and fertility, we investigate to what extent fertility act as a feedback mechanism\ud leading to higher poverty and vice versa. We find that poverty itself has little effect on fertility, whereas\ud there is evidence of state dependence in poverty and important feedback from fertility on future\ud poverty. Not unexpected, we find substantial differences between rural and urban areas.\ud *Institut
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