Growth, Poverty and Chronic Poverty in Rural Ethiopia: Evidence from 15 Communities 1994-2004

Abstract

This paper examines growth, poverty and chronic poverty in 15 Ethiopian villages between 1994 and 2004. Growth and poverty reduction in these communities was substantial; headcount poverty fell from 48 to 35 percent. However, there is also movement in and out of poverty over this period and a significant proportion of the sample was chronically poor. Chronic poverty is associated with several characteristics: lack of physical assets, education, and 'remoteness' in terms of distance to towns or poor roads. The chronically poor appear to be benefit from roads or extension services in much the same way that the non-chronically poor benefit. However, their 'initial' conditions, as captured in estimated latent growth related to time-invariant characteristics suggests that they face a considerable growth handicap. This 'fixed' growth effect is correlated with the characteristics of the chronic poor during the sample period. Chronic poverty, as reflected in poor initial assets and remoteness, appears to be correlated with a divergence in living standards over the sample period.