Determinants of Rural Households’ Vulnerability to Poverty in Chencha and Abaya Districts, Southern Ethiopia (Microeconometric Analysis)

Abstract

This study primarily aimed to examine the determinants of rural households’ vulnerability to poverty and to profile the households according to their level of vulnerability using Feasible Generalized Least Square (FGLS) and Logistic Regression analysis with the help of data collected from a sample of 500 households in two Woredas.

The general poverty line of the study area was determined to be Birr 248 per month per adult equivalent and 29.8 percent of the population in the study areas were found to be poor. The projected consumption percapita after the three step FGLS estimation revealed that, the incidence of vulnerability to poverty in the area was 34.2 percent and therefore, vulnerability was more spread in the study areas than ex post poverty.Using the two vulnerability thresholds, observed poverty rate (0.298) and vulnerability of 0.5, about 28.6%, 5.6% and 65.8% of households were highly vulnerable, low vulnerable and not vulnerable respectively. Most importantly, from the total poor households about 81.75%, 3.25% and 15% were highly vulnerable, low vulnerable and not vulnerable respectively. About 36.06% of female headed households were highly vulnerable while 27.56% of male headed households were highly vulnerable.The logistic regression after the three steps FGLS estimation revealed that being female headed households, large family sizes and low access to all season roads and local markets statistically significantly increased the vulnerability of rural households to poverty. But, credit uses, number of livestock, land size, annual farm income and participation in safety net program statistically significantly reduced the vulnerability of rural households to future poverty.Thus, so as to alleviate ex post poverty and prevent ex ante poverty, government should provide credit services, infrastructures, markets services and promote family planning and participation in non-farm activities like micro and small enterprises by rural households. Provision of such services may help rural vulnerable households to build assets thereby resilience to future poverty.

Keywords: Poverty, Vulnerability, Feasible Generalized Least Square, Logit Model and Ethiopia