Assessment of the Determinants of Urban Household Poverty in North Shewa Zone, Ethiopia: Evidence from Debre Berhan Town

Abstract

Poverty has turned out to be a great global social and economic problem. In Ethiopia, it is multifaceted and deep rooted. The strategies aimed at reducing poverty need to identify and analyze the factors that influence poverty. In this regard, this study was conducted to identify and analyze the extent and determinants of urban poverty in the case of Debre Berhan town. The study made use of cross-sectional household survey data collected from total of 333 randomly selected households in three urban Kebeles of the town. The collected data were analyzed using FGT index and logistic regression. The binary 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 whiles the set of demographic and socio economic variables were explanatory variables. Using cost of basic needs approach the study found that total poverty line (food and non-food poverty line) of the area using the price deflated national average poverty line is 5,220 birr per year per adult equivalent. Using this poverty line as bench mark the study indicated that 62 percent of sample households are poor. The head count ratio, poverty gap, and severity indices of the survey households were 0.62, 0.14 and 0.30, respectively. Econometric results of the binary logit regression model revealed that age of household head, education, saving, access to credit, and remittance were found to be as theoretically expected, have negative and significant effect on the probability of a household being poor whereas age square of head of household and dependency ratio alone were found to have positive 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 adult education and saving habit of households, and ensure better access to formal credit through micro credit financing and banks, are indispensable policy interventions to better target urban poverty.

Keywords: Urban household poverty, Per Capita Consumption, Determinants, Logistic Regression.

DOI: 10.7176/JPID/50-03

Publication date:June 30^th 2019