Dynamics of Poverty among Smallholder Farmers in Ethiopia

Abstract

Wide spread poverty is perhaps the single most serious challenge facing Ethiopia. The country is one of the poorest in the world with high level of poverty incidence, and low level of percapita income and human development. This study employed the Jallan and Ravallion approach of modeling transient and chronic poverty components and separately estimated their respective correlates using Tobit model.  The results from the Tobit model regressions show that households with relatively large number of younger children and those headed by heads with low formal educational attainment are more likely to fall in to transient and chronic poverty. Households headed by female also tend to be chronically and transiently poor. Other factors contributing to chronic and transient poverty include small farm sizes, lower value of total livestock owned, and occurrence of drought, episode of catastrophic disaster and absence of irrigation schemes. On the other hand, while use of modern agricultural inputs and access to credit are associated with lower chronic poverty, off farm income, higher value of crops sold, informal education received by the head of the household and cultivation of chat and teff significantly reduce transient poverty. Sorghum cultivation is inversely related with chronic and transient poverty. Coffee is related with higher chronic poverty whereas enset is associated with higher transient poverty.  The policy implications based on the findings of the study includes: expansion of education, creating access to modern inputs, provision of credit, promoting birth control, promoting cultivation of high yield crops and expansion of off-farm employment opportunities for the rural poor.

Keywords: transient poverty, chronic poverty, Tobit, components approach