Multidimensional Measure of Poverty in Ethiopia: Factor and Stochastic Dominance Analysis

Abstract

This study did an in-depth analysis of multidimensional poverty in rural and small towns in Ethiopia. As social well-being or poverty is a multidimensional phenomenon, using a multidimensional measure of poverty helps circumvent problems surrounding the conventional measures of poverty and helps show clearly the realities of households. In this line, our analysis used six dimensions with 14 indicators to construct a multidimensional index of poverty using first rounds of Ethiopian Rural Households’ Socioeconomic Survey data set. The study also employed a factor analysis for determining relative weights in computing a multidimensional index and did an in-depth analysis of stochastic dominancy of poverty for different segments of society. Besides, a comparison of the extent of poverty using the conventional measure of poverty and the multidimensional approach was also done. The results reveal that intensity, severity, and depth of poverty vary considerably across the two measures. Moreover, demographic, regional, and household heads’ characteristics are major factors in determining poverty.