Economic Growth In Ethiopia Research Articles

The Contribution of Foreign Direct Investment for Economic Growth of Ethiopia: Time Series Analysis

Economic growth of countries is one of the fundamental questions in economics. Most African countries are opening their economies for welcoming of foreign investors. As such Ethiopia, like many African countries took measures to attract and improve foreign direct investment. The purpose of this study is to examine the contribution of foreign direct investment (FDI) for economic growth of Ethiopia over the period of 1981-2013. The study shows an overview of Ethiopian economy and investment environment by the help of descriptive and econometric methods of analysis to establish empirical investigation for the contribution of FDI on Ethiopian economy. OLS method of time series analysis is employed to analyse the data. The stationary of the variables have been checked by using Augmented Dickey Fuller (ADF) Unit Root test and hence they are stationery at first difference. The co- integration test also shows that there is a long run relationship between the dependent and independent variables. Accordingly, the finding of the study shows that FDI, GDP per capita, exchange rate, total investment as percentage of GDP, inflow of FDI stock, trade as percentage of GDP, annual growth rate of GDP and liberalization of the economy have positive impact on Ethiopian GDP. Whereas Gross fixed domestic investment, inflows of FDI and Gross capital formation influence economic growth of Ethiopia negatively. This finding suggests that there should be better policy framework to attract and improve the volume of FDI through creating conducive environment for investment.

Interrogating the economy-first paradigm in ‘Sustainable Development’: towards integrating development with the ecosystem in Ethiopia

This article examines the concept of sustainable development after the Post-2015 Paris Climate Change Agreement with particular emphasis on Ethiopia. Various African countries are vulnerable to climate change, as is evidenced by recent droughts. Ethiopia is selected as a case study in light of its pace in economic growth and as a country which is among the ones that are most affected by climate change. I argue that the concept of sustainable development will be meaningful if it is related only to the core idea of ecological sustainability. Long-term economic growth in Ethiopia is possible if the underlying environmental resources that underpin it are protected and enhanced. Sustainable development remains peripheral and impractical as long as the pursuit of economic and social development remains the practical driving force behind the Ethiopian government’s policy as the primary measure of success. It is argued that the overarching standard for the application of sustainable development should be the integrity of the country’s ecosystem. It is the economic growth which needs to be aligned to the ecological integrity, not the other way round because equitable economic growth requires the protection of its foundation, i.e. the ecosystem. If sustainable development is not based on ecological integrity; it remains a form of hegemonic knowledge, ‘based on a narrow, weak notion of sustainability that promotes reformist fantasies that the crisis can be addressed within the social, political, economic and cultural structures that created it.’ Keywords: Ethiopia, sustainable development, economic growth, social development, ecological sustainability, weak sustainability, strong sustainability

Empirical Analysis of the Relationship between Poverty and Economic Growth in Ethiopia: Micro-Panel Data Evidence from Amhara Region

Empirical Analysis of the Relationship between Poverty and Economic Growth in Ethiopia: Micro-Panel Data Evidence from Amhara Region

Poverty and Economic Growth in Ethiopia: A Multivariate Causal Linkage

The relationship between economic growth and poverty reduction has long been researched in numerous studies around the world; yet, the results are far from being conclusive. Although it is now widely recognised that economic growth is good for poverty reduction through the trickle-down effect, alternative views still exist. This paper, therefore, investigates the dynamic causal linkage between poverty reduction and economic growth in Ethiopia during the period from 1970 to 2014. To address the omission of variable bias, the study includes financial development and investment as intermittent variables – thereby creating a multivariate Granger-causality model. The study uses two proxies to measure the level of poverty in Ethiopia, namely: household consumption expenditure and the infant mortality rate. The study further uses the newly developed autoregressive distributed lag (ARDL) bounds testing approach to cointegration and the ECM-based Granger-causality test to examine this linkage. The study finds that there is a short-run bi-directional causality between economic growth and poverty reduction – irrespective of which variable is used as a proxy for poverty reduction. However, in the long run, the study finds unidirectional causality from economic growth to poverty reduction (proxied by infant mortality rate); but it fails to find any causal relationship between household consumption expenditure and economic growth. The study, therefore, concludes that while poverty reduction and economic growth are mutually beneficial in the short run; in the long run, it is economic growth that leads to poverty reduction when the infant mortality rate is used as a proxy for poverty reduction. The study recommends that policy makers in Ethiopia should pursue both pro-poor policies and pro-economic-growth strategies in the short run; since poverty reduction and economic growth have been found to have a mutual causal relationship in the short run. It is further recommended that such policies should be complementary and mutually reinforcing. If the economic growth and poverty reduction policies are well crafted and co-ordinated; in the short run, a reduction in poverty could lead to an increase in economic growth – in a way that reinforces further reduction in poverty and inequality and benefits the population at large, while promoting higher economic growth in turn. However, in the long run, pro-growth policies should be prioritised; since economic growth has been found to Granger-cause poverty reduction in the long run. This would ensure that poverty in all its forms is reduced as far as is possible.

Countdown to 2015 country case studies: what can analysis of national health financing contribute to understanding MDG 4 and 5 progress?

BackgroundCountdown to 2015 (Countdown) supported countries to produce case studies that examine how and why progress was made toward the Millennium Development Goals (MDGs) 4 and 5. Analysing how health-financing data explains improvements in RMNCH outcomes was one of the components to the case studies.MethodsThis paper presents a descriptive analysis on health financing from six Countdown case studies (Afghanistan, Ethiopia, Malawi, Pakistan, Peru, and Tanzania), supplemented by additional data from global databases and country reports on macroeconomic, health financing, demographic, and RMNCH outcome data as needed. It also examines the effect of other contextual factors presented in the case studies to help interpret health-financing data.ResultsDramatic increases in health funding occurred since 2000, where the MDG agenda encouraged countries and donors to invest more resources on health. Most low-income countries relied on external support to increase health spending, with an average 20–64 % of total health spending from 2000 onwards. Middle-income countries relied more on government and household spending. RMNCH funding also increased since 2000, with an average increase of 119 % (2005–2010) for RMNH expenditures (2005–2010) and 165 % for CH expenditures (2005–2011). Progress was made, especially achieving MDG 4, even with low per capita spending; ranging from US$16 to US$44 per child under 5 years among low-income countries.Improvements in distal factors were noted during the time frame of the analysis, including rapid economic growth in Ethiopia, Peru, and Tanzania and improvements in female literacy as documented in Malawi, which are also likely to have contributed to MDG progress and achievements.ConclusionsIncreases in health and RMNCH funding accompanied improvements in outcomes, though low-income countries are still very reliant on external financing, and out-of-pocket comprising a growing share of funds in middle-income settings. Enhancements in tracking RMNCH expenditures across countries are still needed to better understand whether domestic and global health financing initiatives lead to improved outcomes as RMNCH continues to be a priority under the Sustainable Development Goals.Electronic supplementary materialThe online version of this article (doi:10.1186/s12889-016-3403-4) contains supplementary material, which is available to authorized users.

Modeling household cooking fuel choice: A panel multinomial logit approach

We use three rounds of a rich panel data set to investigate the determinants of household cooking fuel choice and energy transition in urban Ethiopia. We observe that the expected energy transition did not occur following economic growth in Ethiopia during the decade 2000–2009. Regression results from a random effects multinomial logit model, which controls for unobserved household heterogeneity, show that households' economic status, price of alternative energy sources, and education are important determinants of fuel choice in urban Ethiopia. The results also suggest the use of multiple fuels, or ‘fuel stacking behavior’. We argue that policy makers could target these policy levers to encourage transition to cleaner energy sources.

Height for age z score and cognitive function are associated with Academic performance among school children aged 8-11 years old.

BackgroundAcademic achievement of school age children can be affected by several factors such as nutritional status, demographics, and socioeconomic factors. Though evidence about the magnitude of malnutrition is well established in Ethiopia, there is a paucity of evidence about the association of nutritional status with academic performance among the nation’s school age children. Hence, this study aimed to determine how nutritional status and cognitive function are associated with academic performance of school children in Goba town, South East Ethiopia.MethodsAn institution based cross-sectional study was conducted among 131 school age students from primary schools in Goba town enrolled during the 2013/2014 academic year. The nutritional status of students was assessed by anthropometric measurement, while the cognitive assessment was measured by the Kaufman Assessment Battery for Children (KABC-II) and Ravens colored progressive matrices (Raven’s CPM) tests. The academic performance of the school children was measured by collecting the preceding semester academic result from the school record. Descriptive statistics, bivariate and multivariable linear regression were used in the statistical analysis.ResultsThis study found a statistically significant positive association between all cognitive test scores and average academic performance except for number recall (p = 0.12) and hand movements (p = 0.08). The correlation between all cognitive test scores and mathematics score was found positive and statistically significant (p < 0.05). In the multivariable linear regression model, better wealth index was significantly associated with higher mathematics score (ß = 0.63; 95 % CI: 0.12–0.74). Similarly a unit change in height for age z score resulted in 2.11 unit change in mathematics score (ß = 2.11; 95 % CI: 0.002–4.21). A single unit change of wealth index resulted 0.53 unit changes in average score of all academic subjects among school age children (ß = 0.53; 95 % CI: 0.11–0.95). A single unit change of age resulted 3.23 unit change in average score of all academic subjects among school age children (ß = 3.23; 95 % CI: 1.20–5.27).ConclusionNutritional status (height for age Z score) and wealth could be modifiable factors to improve academic performance of school age children. Moreover, interventions to improve nutrition for mothers and children may be an important contributor to academic success and national economic growth in Ethiopia. Further study with strong design and large sample size is needed.

Impact of agricultural exports on economic growth in Ethiopia: The case of coffee, oil seed and pulses

A Thesis Submitted to the Graduate School in partial Fulfilment of the Requirements for the Award of the Masters of Science Degree in Agricultural and Applied Economics of Egerton University. Advisors: Prof. Job Kibiwot Lagat (PhD) and Dr. Delessa Daba (PhD)

English

This study aimed to study the relationship between economic growth and environmental degradation in Ethiopia by questioning the existence of environmental Kuznets Curve. The study uses time series data from 1969/70 to 2010/2011 in a VECM analysis approach. The finding indicates existence of EKC hypothesis in Ethiopia. Like any agrarian country economic growth in Ethiopia inevitably contribute for environmental degradations at the early stage. Later on environmental degradation start to decline with increasing economic growth this might be due to an increase in share of service sector in the economic growth and application of environmental law with economic activity. To sustain the current trend the country should have to follow the existing environmental friend economic policy. Key words: Environmental Kuznets Curve, economic growth, VECM, CO2.

The impact of foreign aid on economic growth:Emperical evidence from Ethiopia (1974-2011) using ARDL approach

This paper investigates the impact of foreign aid on economic growth in Ethiopia using time series data for the period 1974 to 2011. Following the most recent literatures, the paper examines whether aid effectiveness is conditional on stable macroeconomic policy environment using the Autoregressive Distributed Lag (ARDL) approach to co-integration proposed by Pesaran and Shin [1997]. Results provide that the negative coefficient of separate foreign aid in regression model shows aid has negative impact on economic growth, but the positive coefficient of aid policy index interaction shows that aid has positively contributed to economic growth in Ethiopia if supplemented with stable macroeconomic policy environment.

The Impact of Foreign Aid on Economic Growth of Ethiopia (Through Transmission Channels)

The study has examined the impact of foreign aid on economic growth in Ethiopia through transmission channel (i.e through financing investment) over the period 1980/01 to 2013/14 using multivariate co integration analysis. The empirical result from the growth model shows that aid has a significant positive impact on growth in the long run. The empirical result from investment model also indicated that the positive and significant contribution of aid on investment in the long run. In other words the theoretical view of the gap models which is Aid can enhance growth by financing the saving gap is proven in this study. The growth equation further revealed that rainfall variability has a significant negative impact on economic growth. This study indicated also that the country has no problem of capacity constraint as to the flow of foreign aid.

The Impact of Human Capital Development on Economic Growth in Ethiopia: Evidence from ARDL Approach to Co-Integration

The main objective of the study was to investigate the long run and short run impact of human capital on economic growth in Ethiopia (using real GDP per capita, as a proxy for economic growth) over the period 1974/75-2010/2011. The ARDL Approach to Co-integration and Error Correction Model are applied in order to investigate the long-run and short run impact of Human capital on Economic growth. The finding of the Bounds test shows that there is a stable long run relationship between real GDP per capita, education human capital, health human capital, labor force, gross capital formation, government expenditure and official development assistance. The estimated long run model revels that human capital in the form of health (proxied by the ratio of public expenditure on health to real GDP) is the main contributor to real GDP per capita rise followed by education human capital (proxied by secondary school enrolment). Such findings are consistent with the endogenous growth theories which argue that an improvement in human capital (skilled and healthy workers) improves productivity. In the short run, the coefficient of error correction term is -0.7366 suggesting about 73.66 percent annual adjustment towards long run equilibrium. This is another proof for the existence of a stable long run relationship among the variables. The estimated coefficients of the short-run model indicate that education is the main contributor to real GDP per capita change followed by gross capital formation (one period lagged value) and government expenditure (one period lagged value). But, unlike its long run significant impact, health has no significant short run impact on the economy. Even its one period lag has a significant negative impact on the economy.&#x0D; The above results have an important policy implication. The findings of this paper imply that economic performance can be improved significantly when the ratio of public expenditure on health services to GDP increases and when secondary school enrolment improves. Such improvements have a large impact on human productivity which leads to improved national output per capita. Hence policy makers and / or the government should strive to create institutional capacity that increase school enrolment and improved basic health service by strengthening the infrastructure of educational and health institutions that produce quality manpower. In addition to its effort, the government should continue its leadership role in creating enabling environment that encourage better investment in human capital (education and health) by the private sector.&#x0D;

English

This paper examines the causal relationship among savings, investment and economic growth in Ethiopia using annual time series data from 1969/70-2010/11 in a multivariate framework. Results from the PP unit root test shows that all variables under consideration are I(1). Result from the ARDL Bounds Testing indicates that there exists co-integration among gross domestic savings, gross domestic investment, real gross domestic product, labor force and human capital when RGDP is taken as dependent variable. Labor and investment have significant positive effect on economic growth of Ethiopia both in the short-run and long-run while GDS and human capital are statistically insignificant. Moreover, Toda-Yamamoto and Dolado-Lutkepohl as well as Innovative Accounting Techniques (i.e., IRFs and FEVD) approach to Granger causality analysis shows that there exists bidirectional causality between gross domestic investment and economic growth as well as between gross domestic savings and gross domestic investment. Granger causality running from investment to savings and from investment to growth is stronger as witnessed from impulse responses and variance decompositions. Although there is unidirectional Granger causality running from economic growth to gross domestic savings, it is weak. To attain high and sustained growth in the country, increased savings and especially investment are required due to its dual effect. Key words: Economic growth, Ethiopia, Granger causality, savings, investment.

The Role of Value Added Tax on Economic Growth of Ethiopia

The achievement of economic growth is crucial for countries sustainable development. Recently, Value Added Tax (VAT) becomes a major worldwide tax instrument which enhances economic growth. Being a tax levied on the final consumption of goods and services, VAT is collected at each stage of production and distributions when value is added up on them. In Ethiopia, the adoption of VAT to replace the out dated general sales tax as of January 2003 becomes the central landmark tax reform. Accordingly, it has introduced a uniform standard rate of 15% VAT system on most of goods and services. Thus, this paper analyses the role of VAT on economic growth of Ethiopia from 2003 to 2012 based on theoretical and empirical evidences. To meet this objective, time series macro-economic data on GDP, VAT, total tax revenue excluding VAT, non-tax revenue and foreign revenue were used. This data is collected from Ministry of Finance and Economic Development, Ethiopian Economic Associations and Ethiopian Revenue and Customs Authority. Descriptive statistics and multiple regressions were employed to analyze the data. The finding of the study reveals that as compared to sales tax, VAT boosts the general economic growth of Ethiopia but the issue of regressively resembling to sales tax still continues. During the periods under review, the growth rate of VAT was 66.27% on average. For the periods of sales tax, the average growth rates of GDP were only 2.53%. However after executions of VAT, such growth rate reached about 21.9% on average. The analysis also showed as the average ratio of VAT to GDP becomes 2.95%. The finding also reveals that, VAT, total tax revenue and non-tax revenue except foreign revenue were significant at 5% level of significance but all of them positively contributed for economic growth during the periods under review. However, to be effective, it requires strong administrations and cooperation’s of the tax payers with taxing authority and the government in general.

English

Fundamental relationships between different macroeconomic variables may follow certain common theories, but local preferences are also decisive in determining their unique behaviour. &nbsp;Looking into domestic demand-growth nexus and export-growth nexus is, therefore, needed in Ethiopia, so as to understand the long -run economic stance and to capture the short-run dynamics in the national economy. Thus, the aim of this study is to find a causal relationship between exports, domestic demand and economic growth in Ethiopia using time series data over the period 1960 to 2011. Household consumption and government consumption were used to measure domestic demand. Granger causality and Johansen cointegration tests were employed in the empirical analysis. Result of Johansen cointegration test indicates the existence of long run relationship among the variables and Granger causality test result shows a dynamic relationship between export and economic growth, and between domestic demand and economic growth. Exports and domestic demands are important for economic growth and economic growth has an impact on exports and domestic demand in Ethiopia. A successful and sustained economic growth requires growth in both exports and domestic demand. Nevertheless, a balance emphasis should be on domestic demand, particularly household consumption to push the economy towards higher growth path.&nbsp; Key words: Domestic demand, Ethiopia, exports, Granger causality.

Government Expenditure And Economic Growth: The Ethiopian Experience, 1950–2007

This paper investigates the relationship between government expenditure and economic growth in Ethiopia to test Wagner’s Law which postulates that as real income increases there is a tendency for the share of public expenditure to increase relative to national income. Using the bounds test approach to cointegration, the paper finds robust evidence of a long-run relationship between government expenditure and GDP. Using four long-run estimators, we obtained elasticities ranging from 1.73 to 1.79, implying that a 1% increase in income leads to a 1.73–1.79% increase in government expenditure. Applying a modified version of the Granger causality test, we also found a unidirectional causality running only from GDP to government expenditure thus supporting the Wagnerian hypothesis of an expanding public sector. Since there was no causality running from government expenditure to income, the evidence suggests that the Keynesian view that government expenditure can be an effective policy instrument for promoting economic growth in Ethiopia was not supported. Therefore, there is a need for making fiscal policy as a stabilizer to enhance economic growth.

The Impact of Foreign Aid on Economic Growth in Ethiopia

This paper investigates the impact of foreign aid on investment and economic growth of Ethiopia for the period 1971-2010. The result indicates that foreign aid has a statistically significant positive impact on domestic investment, while aid`s positive impact on per capita GDP growth does not depend on any macroeconomic policy conditionality. Rather, aid effectiveness depends on the peculiar social, political and economic institutions of particular periods. Aid is effective during both socialist and democratic regimes. However, aid`s impact on growth was greater for socialist regimes.

The Impact of Foreign Aid on Economic Growth in Ethiopia

This paper investigates the impact of foreign aid on investment and economic growth of Ethiopia for the period 1971-2010. The result indicates that foreign aid has a statistically significant positive impact on domestic investment, while aid’s positive impact on per capita GDP growth does not depend on any macroeconomic policy conditionality. Rather, aid effectiveness depends on the peculiar social, political and economic institutions of particular periods. Aid is effective during both socialist and democratic regimes. However, aid’s impact on growth was greater for socialist regimes.

Official development assistance (ODA), public spending and economic growth in Ethiopia

The objective of this research was to analyse the role of Ethiopia’s government expenditure in economic growth and the importance that ODA has played in financing government spending. The study employed both descriptive and econometric analyses. In the econometric analysis, Ram’s (1986) model is adopted to scrutinize the impact of different composition of public spending on economic growth. The study revealed that public spending on physical investment and human capital development have positive contributions on economic growth while spending on consumption affects growth negatively. Besides, as opposed to those who argue that ODA is detrimental to the growth of the recipient country, the study found a positive contribution in Ethiopia’s growth, particularly during the last eight years when the country achieved high growth rate. However, the country is highly dependent on aid and loan, which made it susceptible to changes in the flow of aid. There was also a prevalence of the problem of over-indebtedness as the export performance and the foreign exchange earning capacity of the country remained low. Key words: Public spending, official development assistance (ODA), debt, economic growth, Ethiopia.

Non-Inclusive Economic Growth of Ethiopia: Evidence from Grass Root Level

Economic growth does not guarantee that all persons in a nation will benefit equally. Growth can bypass the poor or marginalized groups, confine in a particular spatial and sectoral setting and resulting in increasing inequality. This study examines rural household’s perception on how their livelihood status progressing in the last five years and what factors likely influence their perception. Data was collected from a random sample of 188 households living in Meskan District southern Ethiopia. The study finding revealed that 56 per cent of the respondents’ households perceive that their livelihood status was deteriorated and they are getting poorer and more vulnerable than in the past despite the Ethiopia economy grows on average at 5.4% for the period from 1999-2004. The results obtained using ordered probit model indicate that the more households endowed with large landholding size, livestock, draft animals and participate in agricultural extension programme; they are more likely to perceive that their livelihood is getting better off. Livestock and cereals diversification also positively and significantly influence them to perceive that their livelihood is getting along with the recent economic boom of the country. Hence, asset holding is the basic determinant in accessing growth benefits at household’s level and households who are already in the better off position are benefiting from the recent economic growth while asset poor households are excluded and push further to the edge of destitution.