Determinants of Urban Poverty: The Case of Nekemte Town, Eastern Wollega Zone of Oromia Regional State

Abstract

The strategies aimed at reducing poverty need to identify and analyze the factors that influence poverty and could in turn be influenced by policy factors. In this regard, this study was conducted to identify and analyze the extent and determinants of urban poverty in the case of Nekemte town. The study used both primary and secondary data; where the primary data were collected from total of 203 randomly selected households in six urban kebeles of the town. The logit model was fitted to identify determinants of poverty. In this case the probability of a household being poor is taken as a dependent variable and the set of demographic and socio economic variables were explanatory variables. The basic needs approach was employed to identify households as poor and non-poor. Based on this and using the price deflated national average poverty line of birr 5,220 out of the 203 surveyed households, 42 per cent were found to be poor. The head count ratio, poverty gap, and severity indices of the survey households were 0.42, 0.032 and 0.01, respectively. The logit estimation result revealed that family size and rural-urban migration have positive and significant effect on the probability of a household being poor. The sex of the household head, education level, and salary employment were found to have negative and significant effect on poverty. Since most of the poor are concentrated around the poverty line as we observe from the poverty gap, policies should focus on absolute poverty rather than relative poverty among the poor. promoting female education should be an important element of poverty reduction policies this is because education and fertility are negatively correlated such a policy could also have an impact on household size which is another important determinant of poverty in Nekemte.

Keywords: Poverty, urban, household and expenditure