THE ROLE OF SCHOOLING IN THE ALLEVIATION OF RURAL POVERTY IN ETHIOPIA

The impact of education on farmers' choice of activities and household welfare are modelled and estimated using farm household data for rural Ethiopia. We find that education has significant effects on household welfare. Schooling increases the adoption of new technologies and facilitates entry into highly profitable farm and non-farm activities, all of which may increase welfare and help farm households escape out of income poverty. An additional year of schooling in a household increases the welfare by 8.5 percent. These findings provide a rationale to governments and donor organisations to include the expansion of rural schooling (through encouragement of parents to send their children to school) in their policy reform as a means of reducing material deprivation.Education, welfare, poverty and rural Ethiopia, Food Security and Poverty, Labor and Human Capital,

Financial access to micro and small enterprise operators: the case of youth-owned firms in Ethiopia

The government of Ethiopia has been providing financial access to micro and small enterprises through microfinance institutions. Despite the financial services support given to MSEs, lack of access to finance remains the main business challenge limiting the expansion of the self-employment sector in Ethiopia. This paper aims to study what financial sources are available to MSE operators and examine what factors drive access to credit. Quantitative information was collected from a sample of 909 youth MSE operators and a descriptive and econometric model was applied to examine sources of finance, factors influencing access to loan, and constraints of accessing financial services. Only very few operators (about 8.7%) used borrowing from the formal sector as a source of funding their investment. The result of the study shows that inadequate collateral and difficulties in proving their credit worthiness or absence of credit history were by far the main reasons that discouraged youth MSE operators from submitting applications for bank loans, followed by difficulties in processing loans and the high cost of borrowing. The regression results indicate that age, type of enterprise, and possession of a business plan by the youth MSE owners are significant variables influencing the likelihood of taking a loan. In other words, as age increases, the probability of the MSE operator to take a loan tends to increase. Type of enterprise was found to have a negative effect, indicating that operators in microenterprises have lower probability of taking credits than those engaged in small enterprises. The finding of the study also reveals that the age of the owner, the type of the enterprise, migration status, the location of the business, and the presence of a business plan were statistically significant variables influencing the size of credit accessed by the operators. There is a need for a deliberate intervention and a tailored support program by government and development partners, on the basis of size and gender, to improve financial access to the youth MSE operators without distorting the financial market and ensuring the sustainability of the finance providers.Key words: Youth owned firms, MSE financing, EthiopiaJEL Classification: L0, L1, L5, L

Are Farmers Completely Rational Consumers and Do They Suffer from a Borrowing Constraint? The Dutch Case

There is some confusion in the literature on the consumption behaviour of farmers. We try to clear up some of the issues surrounding this confusion by elaborating and testing a model. Euler equations have been derived from a constant relative risk aversion utility function for total consumption expenditure, household expenditure and other expenditure, which includes durable goods. According to a test of Euler equations, farm households are not simply optimising lifetime utility. Rather, these households follow simple consumption rules, strongly influenced by habit formation. In line with most of the literature, we find that farm households are not borrowing constrained in their consumption expenditures.consumption, Euler equation, borrowing constraint, Dutch farm households, Farm Management,

Utility-consistent poverty in Ethiopia, 2000 - 11: Welfare improvements in a changing economic landscape

We use Arndt and Simler's utility-consistent approach to calculating poverty lines to analyse poverty in Ethiopia in 2000, 2005, and 2011. Poverty reduction was steady but uneven, with gains greatest in urban areas in the first half of the decade, and in rural areas in the latter half. Other monetary and non-monetary measures of well-being confirm the general pattern of persistent improvements, though the large declines in poverty are not entirely supported by the magnitudes of change in other measures. Nonetheless, data comparability issues warrant that great care be taken in interpreting the degree to which poverty fell

Growth and chronic poverty: Evidence from rural communities in Ethiopia

What keeps some people persistently poor, even in the context of relative high growth? In this paper, we explore this question using a 15-year longitudinal data set from Ethiopia. We compare the findings of an empirical growth model with those derived from a model of the determinants of chronic poverty. We ask whether the chronically poor are simply not benefiting in the same way from the same factors that allowed others to escape poverty, or whether there are latent factors that leave them behind? We find that this chronic poverty is associated with several initial characteristics: lack of physical assets, education, and ‘remoteness’ in terms of distance to towns or poor roads. The chronically poor appear to benefit from some of the drivers of growth, such as better roads or extension services in much the same way that the non-chronically poor benefit. However, they appear to have lower growth in this period, related to time-invariant characteristics, and this suggests that they face a considerable growth and standard of living handicap.

Children's Educational Completion Rates and Dropouts in the Context of Ethiopia's National Poverty Reduction Strategy

A combination of quantitative and qualitative method was used to analyse the determinants of school completion/dropout of children from primary education. A Cox box proportional hazard model was used analyse the survival of children in primary education. The findings have important implications for the formulation and revising Ethiopian Poverty Reduction Strategy Paper. While the policy focus of the 1996-initiated ESDP and the SDPRP (2002-5) on increasing educational access for all has been broadly successful, children from poor and/or highly indebted families still face significant constraints because they have to contribute to household survival through paid and unpaid work. It is therefore imperative to increase efforts to improve the livelihood options of the poor, including greater income generation opportunities, particularly in rural areas and for women. However, such strategies need to be child sensitive. For instance, income generating opportunities for women should simultaneously be accompanied by community childcare systems in order to prevent older children from shouldering their mother's childcare burden.education, children, Ethiopia, PRSP, poverty, survival analysis, Labor and Human Capital, A2, D1, J2,

Estimating utility-consistent poverty in Ethiopia, 2000-11

We adapt the standardized Poverty Line Estimation Analytical Software (PLEASe) computer code stream based on Arndt and Simler's (2010) utility-consistent approach to analyse poverty in Ethiopia in 2000, 2005, and 2011. Several data-related issues create challenges to estimating the spatial and temporal distribution of poverty in a manner that meets both consistency and specificity objectives. This paper documents how we adapt the code stream to address changes in data collection periods and strata for the respective surveys over time. Changes in the duration and time of year for data collection can be especially problematic for consistency in the presence of annual inflation of over 30 per cent. In addition, the Ethiopia case provides an example of how to address convergence problems encountered when running the PLEASe code. Careful consolidation of spatial domains and limiting the number of iterations in the estimation of poverty lines are potential solutions

Insurance motives to remit: Evidence from a matched sample of Ethiopian internal migrants

Migration and remittances can be used by rural households as a means of insurance, investment, and income augmentation. Ample attention has been given to studying international remittance flows, since for many countries such transfers comprise a significant fraction of income. Remittance flows from internal migrants are relatively understudied, particularly in Africa, where remittance rates are poor. We use a unique matched migrant sample to study what drives the low remittance rates in Ethiopia. Descriptive statistics suggest remitters are positively selected in terms of wealth characteristics compared with the average tracked migrant. Limited skill transferability and liquidity largely explain low remittance rates in Ethiopia. Weaker evidence suggests migrants are additionally motivated to remit as a form of self-insurance against own shocks to income and investments towards future inheritable assets.Insurance, Migration, Remittances,