Does building the resilience of rural households reduce multidimensional poverty? Analysis of panel data in Ethiopia

Abstract

Enhancing resilience capacity holds the key to welfare improvement. While there are assumptions that resilience has led to curbing poverty, in fact, the empirics are limited to ascertain the linkages between resilience and multidimensional poverty and find out implications for policy uptake in Ethiopia. This study addresses the role of household resilience capacity on multidimensional poverty reduction using the Ethiopian Socioeconomic Survey data collected by the Central Statistical Agency in collaboration with the World Bank Living Standard Measurement Study (2011/12 - 15/16). The study finds a steady decline in multidimensional poverty as a response to slight increases in resilience capacity. The reduction is emanated from a greater change in headcount than the intensity of deprivation. The fixed effect estimate indicated that enhancing resilience capacity is the most decisive factor responsible for multidimensional poverty reduction. Nevertheless, resilience is not the panacea. Therefore, the rural households curb multidimensional poverty by increasing crop income through commercialization and gradually diversifying non-farm income sources. Moreover, wage labor participation, literacy, saving, and having more economically active members are found to open up opportunities to sustained multidimensional poverty escapes. The dynamic random effect probit model also confirmed the existence of genuine state dependence of multidimensional poverty in rural Ethiopia. Findings suggested that the government policies aimed at enhancing resilience for multidimensional poverty should adopt productive inclusion and rural transformation. Promoting synergistic rural-urban linkages also ensures a balanced mix of infrastructure development that would improve market access and promote the rural non-farm sector, commercialization, and livelihood diversification. Support for migration, making urban development migrant-friendly, ensuring sustainable financial inclusion of the poor, and increasing access to basic services should also be part of the strategy. This implied that striving for sustainable multidimensional poverty reduction demands change in the patterns of labor mobility, livelihood transition, and urbanization.