Ethiopian Journal of Economics (EJE) is a peer-reviewed journal hosted by the Ethiopian Economics Association (EEA). The Journal follows an open-access policy where manuscripts are freely downloadable in addition to its print version available at a subsidized price. EJE accepts manuscripts from all areas of economics as a full research article, review papers, and technical notes. The issues are published twice a year. EJE accepts original and high-quality research papers from Ethiopia and elsewhere outside Ethiopia and the papers pass through a double-blind peer review process. The journal has been officially accredited by the Ministry of Education (MoE) and Addis Ababa University as one of the reputable journals in Ethiopia. Submissions to the Ethiopian Journal of Economics are accepted at any time, year-round, with no article processing fees or submission charges. The publisher, Ethiopian Economics Association, covers article processing and publication expenses. EJE is indexed by AJOL Editors, Authors, and Reviewers are encouraged to visit the publication ethics and publication malpractice statement in addition to other guidelines
Factors Affecting Households’ Inflation Expectations in Major Cities of Ethiopia
Section: Articles Keywords: Consumer purchasing power, Demographic factors, Ethiopia, Inflation expectation, Social capital This study explores inflation expectations of consumers in major Ethiopian cities, focusing on Addis Ababa and Adama, where rising prices significantly affect consumers’ purchasing power. Primary data were collected through a structured questionnaire from sample consumers within selected towns that were chosen based on population and cost of living. The study used simple random sampling to select respondents with access to marketplaces for Teff and onions, which are commonly, consumed food items. In the data analysis, the study employed econometric and descriptive statistics. The overall model was statistically significant, explaining 92.5% of the variability in the dependent variable. The linear regression model revealed that demographic and socioeconomic factors substantially affect consumers' inflation expectations, with sex and age showing no statistically significant effect on expectations. The model results show that households headed by secondary school graduates have a positive and significant effect on price rise expectations. Monthly incomes and home ownership of consumers have significant but negative effects on price rise expectations, while families with larger family sizes expect significant price rises. Participation in social capital mechanisms such as "Idir" significantly decreased expectations of price increments. To ensure stable household inflation expectations in Ethiopia, a comprehensive strategy addressing consumer awareness, income, and asset ownership is vital.
Consumer purchasing power, Demographic factors, Ethiopia, Inflation expectation, Social capital
Copyright (c) 2025 Ethiopian Journal of Economics https://creativecommons.org/licenses/by-nc-sa/4.0
The Fiscal Outlook, Resource Envelope and Revenue Prospect of Amhara Region, Ethiopia
Section: Articles Keywords: Fiscal Performance Index, Resource Envelope, Revenue Forecasting, Amhara Region Achieving sustainable developing goals (SDGs) in Ethiopia in general and regional states such as Amhara, among other things, require for government to efficiently and adequately mobilize resource to finance tailored programs for the realization of the same. This study assesses the fiscal efficiency, resource envelope, and revenue prospects of the Amhara region. We employed the multidimensional fiscal performance index, moving average, and triple exponential smoothing methods. The data were sourced from the Finance & Economic Cooperation (BoFEC) and Plan & Development Bureaus. The findings revealed that the fiscal stance of the region is poor, characterized by a high deficit index, a low improvement index, and a low expenditure quality index. The performance of the region in non-tax revenue collection is better than in tax revenue collection. In terms of tax revenue, the great majority comes from direct sources, and the trend is expected to continue even for the next decade. Expenditures exceed revenues and the region heavily relies on subsidies from the federal government. Even though direct tax revenue is above indirect tax revenue, it never crosses the upper bound of the resource envelope. All these factors call for a proper attention of the regional government to improve its expenditure quality, widen the tax base, enhance allocative efficiency, and promote tax reforms.
Fiscal Performance Index, Resource Envelope, Revenue Forecasting, Amhara Region
Livelihood Strategies of the Marginalized Urban Poor: Insights from the Negede Weyto People of Bahir Dar, Ethiopia
Section: Articles Keywords: Negede Weyto, livelihood strategies, urban poor, multinomial logistic regression. The urban poor, experiencing year-round uncertainty and livelihood insecurity, are compelled to adopt various survival strategies to meet daily challenges. This study draws on micro-level data collected through field surveys in Bahir Dar City, where the Negede Weyto people reside. The study aims to understand the nature of poverty within the community and the various livelihood strategies they adopt to cope with its challenges. The major challenges and opportunities of the people are also revisited. The study utilized both primary and secondary data, which are qualitative and quantitative in nature. The primary data were collected from 375 randomly selected households and four Focus Group Discussions (FGDs). The findings indicate that a large share of this population depends on daily labor for their income, though income levels differ across and within different occupational groups. Using a Multinomial Logistic Regression Model, the study examined factors influencing the choice of livelihood strategies among the Negede Weyto, revealing that the majority of the Negede Weyto people are self-employed. The educational status of the household head positively and significantly influences the likelihood of being in the wage-employed category compared with the collective support category. The results also show that the Negede Weyto have limited access to livelihood resources and are vulnerable to various shocks, leading to livelihood insecurity. The study also highlighted a gap between government policies and their implementation, with NGO policies often failing to address the realities faced by the urban poor. Additionally, limitations in the capacity of local governments and NGOs have contributed to ongoing livelihood vulnerability. The study recommends improved access to education, which is crucial for changing the livelihood structure of these groups in the long run. Special financial support should also be provided to reduce the poverty-induced dropout of children among the Negede Weyto people. The paper notes that these groups dominate the production of basketry. Therefore, the government could enhance their livelihoods by providing targeted market support, such as ensuring appropriate workplaces, input/raw material support, access to skill training to enhance their competitiveness and market penetration throughout the country, promoting their products, and negotiating higher prices for their goods.
Negede Weyto, livelihood strategies, urban poor, multinomial logistic regression.
A Meta-analytic Review of the Link between Market Access and Contractual Crop Production in Ethiopia
Section: Articles Keywords: Crop contract farming, Ethiopia, Open market access, Meta-regression analysis This systematic review and meta-analysis introduces a new perspective for measuring open market access to examine how it influences the success of contract farming initiatives in Ethiopia. It addresses the types of associations that exist between contract farming and open market access and fills the existing empirical and knowledge gaps. The review uses thirty studies published between 1990-2024.The findings show there is a notable effect between contract farming earnings and open market access, with a considerable difference across the regional states in Ethiopia. Mainly, high market access has a better effect on contract farming proceeds compared to other levels. Moreover, Amhara emerges as a more favorable working environment for contract farming stakeholders, while Tigray and Sidama show less favorable situations. Farmer characteristics, including training (education), closeness to market centers, and household head’s age, encourage the contract farming system. In contrast, access to extension services reveals a counterproductive association with contract farming success, suggesting that its delivery requires re-evaluation, especially in less supportive areas. To promote national agricultural growth, this study advocates for facilitating cross-regional agreements that link experienced farmers and contractors to new areas. There is a need for policy prioritization for farmer empowerment and regional-level market opportunities for contract farmers. This can be realized by providing field-based training focused on contract management directly to farmers, and by facilitating cross-regional agreements that link experienced farmers and contractors to low-experienced areas in the country.
Crop contract farming, Ethiopia, Open market access, Meta-regression analysis
Sectoral Innovation Systems for Agro-Industrial Transformation in Ethiopia: A Systematic Review of Integrated Agro-Industrial Parks and Global Value Chains
Section: Articles Keywords: Sectoral Innovation Systems, Integrated Agro-Industrial Parks, Global Value Chains, Agro-industrial Transformation, Innovation Systems, Sustainable Development. Ethiopia’s agro-industrial transformation, driven by Integrated Agro-Industrial Parks (IAIPs), is central to agricultural modernization and economic growth. However, the role of Sectoral Innovation Systems (SIS) in supporting IAIPs, particularly in their integration into Global Value Chains (GVCs), remains underexplored. This systematic review examines the influence of SIS on Ethiopia’s agro-industrial transformation, with a focus on IAIPs and GVC participation. Based on 40 peer-reviewed studies published between 2000 and 2024, the review identifies how SIS can address key challenges, such as infrastructure deficits, market access, and innovation within IAIPs. Findings highlight that IAIPs contribute significantly to value addition, export growth, and agricultural commercialization, facilitating Ethiopia’s GVC integration. However,, barriers like weak institutional frameworks, limited technological adoption, and inefficiencies in logistics impede their full potential. To optimize IAIPs, the review stresses the importance of strategic investments in infrastructure, strengthening institutional frameworks, and fostering public-private collaborations. Additionally, policy interventions that prioritize technological innovation, particularly in digital agriculture, are critical for enhancing competitiveness. The study offers valuable insights for other developing countries aiming to utilize IAIPs and SIS for sustainable economic development.
Sectoral Innovation Systems, Integrated Agro-Industrial Parks, Global Value Chains, Agro-industrial Transformation, Innovation Systems, Sustainable Development.
Modelling Poverty and its Determinants in Addis Ababa: A Focus on Multinomial Logit Selection Model
Section: Articles I have used different econometric models (OLS, probit and multinomial logit selection) to analyse factors leading to poverty. The main emphasis of the study is to model determinants of standard of living in Addis Ababa using two-stage estimation technique. In the first step, a multinomial logit model is applied to distinguish between three socio-economic groups. The second stage regression determinants of standard of living i.e total household expenditure per adult equivalent per month) are identified after incorporating the correction term for sample selectivity using the Lee-Heckman method. Among others, variables such as education, access to credit, employment status. gender, marital status and food shortage experience are significant determinants of welfare.
Copyright (c) 2024 Ethiopian Journal of Economics https://creativecommons.org/licenses/by-nc-sa/4.0
An Assessment of the Grain Marketing Policies and its Impact on Peasant Producers: The Case of Arsi Zone
Section: Articles In late 1970s and through 1980s, state control in agricultural marketing was taken as the best for the development of peasant agriculture. Later however, state failure was claimed and the need for market oriented strategy has been advocated. Both had their own impact on peasant producers. This paper discuses their impact on the peasantry. It is found that it should not be a question of statist or markets substituting each other but should operate in a complementary way to improve the agricultural marketing system and enhance peasant agriculture.
Export Earnings Instability of ACP Countries: A Time-Series Analysis
Section: Articles This paper examines the level of export earnings instabilities of ACP countries (African, Caribbean and Pacific states signatories of the bomb Convention); their evolution through time and across countries At present, this group comprises of seventy developing countries. This deliberate choice of the sample was done m order to examine whether fluctuations in export earnings of these countess have relatively decreased as envisaged by the STABEX system, of the Lom4 Convention, introduced in 1975 by the European Economic Community The country coverage of previous studies on export earnings instabilities was generally limited end most of the ACP countries have been rather ignored. Therefore, instability indices for merchandise exports were computed for a total of thirty-nine ACP countries over the periods 1970-1979, 1980-1990 and 1970-1990 The results of the study indicate that instability indices vary across countries. Moreover, a comparison of the indices for 1970-1979 and 1980-1990 reveals that for more than half of the countries in the sample (21). there was a reduction on the level of export instability between the two periods whereas for fifteen countries the reverse was true It was only for three countries that instability indices remained the same between 1970s and 1980s.
Institutions and Economic Development: A Survey of Aspects of the New Institutional Economics
Section: Articles In recent years, the New Institutional Economics, though yet at its formative stage, has gamed currency among some economists and donor agencies like the World Bank. However, its subject matter and its relevance to current issues are uttle understood by many researchers interested in development problems. This paper presents a survey of the literature and a review of the current state of the New Institutional Economics (NIE) with a focus on its meaning, strengths, weaknesses and current argument about its role and importance in the development process. The paper underlines the importance of the NIE and identifies agenda for future research.
Demographic Characteristics of Poor Households in Urban Ethiopia: The case of Dire Dawa Town
Section: Articles The paper presents evidence on the links between poverty and demographic variables such as marriage patterns, household size and composition, fertility and mortality experiences, perception and preferences for children and also knowledge, attitude and practices of family planning, using a subjective poverty line and then assesses their demographic characteristics. The results indicate that the poor have large family size, high dependency of children and high fertility. However, compared to others, poor households wished to have fewer children (and most of them also need no more additional children. However, the study found out that most of these women had limited knowledge of family planning methods, and even those who know about it had rarely practiced it. The results also show that, as one would expect, death rates were consistently higher among the poor and lower among the well-off.
Evaluating the Efficiency of Farmers in Ethiopia
Section: Articles This article is primarily concerned with applying Data Envelopment Analysis (DEA) for measuring the efficiency of smallholders in Ethiopia. Two variants of DEA models, Constant-returns-to-scale (CRS) and Variable-returns-to-scale (VRS), are applied on individual farm level cross-sectional data from three villages in Ethiopia. The empirical results of both measures show that the farmers in the sample are more technically inefficient than scale inefficient. This implies that policy should largely focus on means of raising technical efficiency. Moreover, the results also indicate that there is regional variation in the level of efficiency suggesting selective policy intervention based on the specific environment.
Regulation Versus the Market for the Production of Accounting Information: A Review of the Theory in the Context of Sub-Saharan Economies
Section: Articles The paper examines the plausibility of the arguments far and against regulating the production of accounting information The literature is reviewed and discussed in the context of Sub-Saharan Africa countries After a careful review of the debates and the contemporary theories of financial disclosures, it is argued that voluntary disclosure mechanisms cannot be used as policy instruments because of the absence of institutions. Two epilogues are provided first a general one and the second specific to Sub-Saharan economies.
Macro Data and Macroeconomic Analysis: The Relevance of a Consistent Macroeconomic Database in Ethiopia
Section: Articles Designing, and implementing adjustment programmes in the context of a mixed economy requires the understanding of the macroeconomic condition in general and public and private sector interaction in particular. However, much of the macroeconomic analyses in Ethiopia suffers hot only from the tack of accurate data sources but also from inconsistency across different sources on the one hand and analytical inconsistency within an identified source on the other. The focus of this study is the discrepancy and inconsistency of the existing data reported by different institutions. By highlighting the problem first and outlining the relevant analytical framework, a consistent macro database is built for the period 1970- 1990 (G.C). Although the data is built using international sources the methodology can readily be applied to data from domestic sources (notably National Bank of Ethiopia, Central Statistical Authority, Ministry of Finance, and Ministry of Economic Development and Cooperation). It is also recommended that the above institutions need to co-ordinate their data in analytically consistent framework.
Poverty Dynamics in Ethiopia: State Dependence and Transitory Shocks
Section: Articles Keywords: Poverty persistence, state dependence, unobserved heterogeneity This paper focuses on the persistence of poverty in rural and urban households in Ethiopia by estimating dynamic probit models. The model allows for unobserved heterogeneity, first order state dependence and serially correlated error components. The dynamic probit model of poverty that controlled for household heterogeneity and serial correlation performed better in explaining the dynamics of poverty in Ethiopia. In rural areas, the effect of controlling for heterogeneity and serial correlation was, typically, to increase the coefficient of the true state dependence one fold. In urban areas controlling for transitory shocks brought out, more strongly, the effects of differences in towns of residence on the incidence of poverty, while it reduced the importance of exogenous household attributes such as ethnicity, age and family background. Transitory shocks also contributed to poverty persistence in two additional ways. First, the persistence of urban poverty increased dramatically once we controlled for transitory shocks. Secondly, intrinsic risk of falling into poverty also declined substantially implying only a tiny fraction of the urban population would be at risk of falling into poverty were it not for transitory shocks.
Poverty persistence, state dependence, unobserved heterogeneity
Poverty Transition and Persistence in Ethiopia
Section: Articles Based on a rural and urban data set from Ethiopia, exiting from or re-entering poverty was found to depend on the time spent in or out of poverty. In comparison to urban areas, it was easier to exit or re-enter rural poverty. However, exiting poverty was more difficult the longer households were in that state, even more in urban than rural areas. In addition, the average time spent in poverty following a poverty spell is quite long for a typical household. Time-varying and other household characteristics were examined in the context of exiting and re-entering into poverty. Features of chronic poverty and vulnerability were also analysed and the policy implications discussed.
Poverty and Income Distribution in Ethiopia: 1994 - 2000
Section: Articles Poverty and income distribution in Ethiopia were analyzed for the period 1994-2000 based on a panel data-set. The period under study is characterised by fast changing circumstances, from peace, economic reform and recovery during 1992-1997, then deteriorating into all-out war with Eritrea, severe drought and political instability during 1998-2000. The paper examines the evolution of poverty and income distribution in this setting, with a focus on the decomposition of poverty and inequality into proximate determinants. The potential effects of policy changes on poverty were also simulated and the results are reported.
Has Privatization Promoted Efficiency in Ethiopia? A Comparative Analysis of Privatized Industries vis-a-vis State Owned and Other Private Establishments
Section: Articles There has been still a debate about the efficacy of privatization for economic transformation of countries. Nonetheless, many developing countries including Ethiopia have privatized public owned enterprises as a manifestation of their commitment to implement the reform packages induced by multilateral institutions through the Structural Adjustment Program. The proponents for pro-privatization strongly argue that private enterprises operate more efficiently than those that are owned by the state. The main objective of this paper is, therefore, to assess the extent to which privatized industries operate more efficiently as compared to those that remain under the public domain and other private industries. A Cobb-Douglass stochastic frontier production function is estimated for the group and separately for privatized industries. The econometric result revealed that the average technical efficiency for the whole sample was about 73.4% during the period 1998/99 2001/02. Privatized industries were found relatively inefficient with a score of 69%, while public and other private industries reported 75% and 71%, respectively. It was also found that efficiency of privatized enterprises continuously declined during the same period. It is an indication, at least in the Ethiopian context, that privatization may not necessarily ensure efficiency gain. Thus, government should revitalize its hasty move towards transferring public enterprises to private hands.
The Distributional Implications of Personal Income Tax Reforms: The case of civil service sector in Ethiopia
Section: Articles Keywords: income tax, progressive tax rate, income distribution and redistribution, tax reform The principles of horizontal and vertical equity are central in fiscal policy. The distributional implications of a taxation system are derived from how the tax codes incorporate these principles for a given pattern of income distribution. This paper examines the distributional issues and implications of personal income tax reforms in Ethiopia with reference to the civil service sector. The theoretical issues and policies are analyzed in light of the 1994 and 2002 income tax reforms. We argue that whereas the reform measures undertaken so far have addressed some problems in the fiscal system, further measures are needed to improve the capacity of the tax code to promote the principles of equity and to encourage capital accumulation and growth efforts. The built-in structure of the tax system, coupled with conventional approaches in tax policy design and implementation, has contributed towards policy stances that weaken the role that the tax system could play in promoting sustainable economic growth and address problems of chronic poverty.
income tax, progressive tax rate, income distribution and redistribution, tax reform
Instability of Ethiopia’s Export Earnings, Prices and Quantities
Section: Articles This article examines Ethiopia’s instability in export earnings, prices and quantities of the major export commodities over the period 1964-2002. Analysis of the composition of exports through time reveals that Ethiopia has not diversified the commodity structure of its exports in that its export earnings depend on only a few agricultural products. In fact, the results of this study show that six agricultural commodities (chat, coffee, fruits and vegetables, hides and skins, oilseeds, and pulses) accounted for about 86% of the total export earnings of the country. The results indicate that the amplitude of instability varied from one commodity to another. Moreover, the results show that for the major export commodities, except for coffee, domestic supply factors were more important in explaining instability in earnings than demand related factors. The findings of this study suggest that the country needs to break away from its heavy dependence on traditional export commodities for which it is a marginal exporter, thus a price taker.
Government Policy and Dynamic Supply Response - A Study of the Compulsory Grain Delivery System
Section: Articles The impact of government policy on the dynamics of agricultural supply in the 1980s is explored. Specifically, an intertemporal acreage allocation model that allows for the impact of compulsory grain delivery is developed. Subsequently, an estimable dynamic acreage demand equation is derived, and estimated for a crop using region-level data. Generalized method of moments (GMM) estimators for dynamic panel data models are used. The elasticity estimates thus obtained suggest that the demand for crop acreage (and hence the supply of crop output) responded negatively to the level of forced grain procurement, and positively to output price.
What Do Farmers Financially Lose if they Fail to use Improved Seeds? Some Econometric Results for Wheat and Implications for Agricultural Extension Policy in Ethiopia
Section: Articles Before making any recommendation for the use of improved seeds, policy makers have to ensure that the improved seeds are superior to the local ones. To generate information on the financial viability of improved seeds, this paper computes the gross margin that farmers lose when they fail to use these inputs. Using the switching regression method, it then examines the contextual factors that affect the income foregone if farmers fail to use improved seeds. The study is based on the fifth round of the Ethiopian rural household survey data taking wheat as a case. The estimated foregone gross margin ranges from 277 to 886 Birr per hectare and the total gross margin foregone at the national level ranges from 295 million to 946 million Birr per year. On the whole, the results suggest that, even though failure to use improved seeds involves foregoing financial benefits, it varies across farmers and farming systems. Not all farmers forego equal financial benefits. The regression results show that the gross margin foregone increases with labour use, fertilizer use, farmers’ experience with the extension package, wheat marketing, rainfall suitability, and wheat price index. On the contrary, it decreases with plot quality, education, input price index, oxen ownership, and chemical use. The results imply that improved seeds will have better income generating capacity when accompanied by other complementary services. Agricultural extension policy should establish targeting principles based on the comparative advantage of the respective seeds. On the whole, blanket recommendation of improved seeds for all farmers and farming systems across the board has to be re-visited.
Stochastic Producer Prices and Shock Persistence in Agriculture: Implications for Food Policy and Price Information
Section: Articles Keywords: Producer price; Non-stationary stochastic series; Shock persistence; Food production; Food policy Unstable product prices arising from shocks increase the uncertainties of producers and bias their subsequent price expectations and production decisions. This problem is known to be at the back of declining use of improved techniques by food crop producers. This paper investigates the time series properties of producer price data observed during the post-liberalization period for two major food crops in Ethiopia in order to understand whether prices are stochastic and shocks are persistent. The results obtained suggest non stationary stochastic price dynamics and shock persistence in which price uncertainty is inherent, with a possible impact of negative bias in the expectation and production decisions of generally risk averting farmers. From a food policy point of view, negative bias in farmers’ price expectations and production decisions, whenever prices follow a downward scenario, implies that agricultural market policy instruments meant for the promotion of food crop production might have very few chance of success unless accompanied by a strong market information service on prices. Moreover, policy interventions are recommended only to the extent that their impacts are predictable under a condition of non-stationary stochastic product prices and they do not result in negative shocks.
Producer price; Non-stationary stochastic series; Shock persistence; Food production; Food policy
Dynamic Money Demand Function for Ethiopia
Section: Articles This study has estimated stable long run and dynamic money demand equations for Ethiopia. However, the study shows some portfolio demand adjustment by agents after liberalization of asset prices after 1992. The study, by estimating money demand using disaggregated price level, shows that livestock, money and housing items are complements, and money and all other goods are substitutes in the portfolio demand of Ethiopian agents. The study suggests that the government should follow a sound trade policy, strengthen the development of exchange oriented rural economy, use depreciation of currency than domestic credit control, facilitate conditions for the development of capital market and strengthen policy of indirect monetary control, and privatization to achieve sustainable growth and development. The study also suggests that the government should look for an alternative higher rate of inflation rather than targeting it to a low rate of single digit, which might hinder accelerated growth.
Diversification Across Crops and Land in Small-Holder Agriculture in Ethiopia: The Case of Shewa Administrative Region
Section: Articles Keywords: Ethiopia, Smallholder agriculture, Risk response, Liquid assets, Land fragmentation, Crop diversification The opportunities available for consumption smoothing can be expected to influence the ways in which rural households respond to income risks and thereby impact on the degree of diversification and adoption of risky activities. By assuming that diversification is a risk reduction mechanism, this paper deals with the diversification across crops and plots in Ethiopian small-holder agriculture. Specifically, the incidence and levels of land fragmentation and cereal crop diversification is analyzed in relation to the households' consumption security provided by liquid asset stocks (livestock). It is hypothesized that more endowments, specifically in terms of livestock assets will lead to less diversification (more specialization). A four year rotating panel data from the “Rural Integrated Household Survey Program” of the Ethiopian Central Statistical Authority (CSA) collected during 1988 to 1991 in Shewa, Ethiopia is employed. Contrary to the expectation of a safer strategy, land fragmentation was found to have a positive relationship with the level of asset ownership (though insignificant) and land holdings. This result, coupled with the positive relationship between population density and fragmentation, and the absence of land markets in rural Ethiopia, suggests that farmers were supply constrained. When the rural population is growing faster than the number of off-farm jobs, agriculture is the only career option for many. As more people try to make a living from a limited land base, pressure to divide and sub-divide farms and fields will increase. This calls for measures to ease barriers to land transactions which may then induce greater consolidation of plots thereby setting in motion a wide range of social and economic benefits. It also calls for enhancing the attempts being made to facilitate the introduction of appropriate technology, to create off-farm employment, and to curb population growth. On the other hand, it was found that, apart from climatic and agronomic factors, there is a systematic bias towards more crop diversification as the level of asset ownership and land holdings decline. Households with higher levels of livestock asset ownership and/or farm size have relatively lower levels of crop diversification. Thus, households with the ability to bear more risk (through their asset position) are found to have greater concentration on fewer cereal crops. The traditionally developed strategy of closely integrating crop and livestock enterprises to buffer against uncertainty in peasant agriculture is under threat due to the ever expanding cultivation of crops into grazing land, feed shortages, and overgrazing of existing pasture. This limits the possibility of poorer households entering into livestock rearing and those who have already done so may be forced to give it up.
Ethiopia, Smallholder agriculture, Risk response, Liquid assets, Land fragmentation, Crop diversification
Aggregate Saving Behavior in Africa: A Review of the Theory and the Existing Evidence with a New Empirical Results
Section: Articles The objective of this paper is to review the theoretical and empirical literature on aggregate saving behavior and to examine the available evidence in order to draw lessons that are particularly relevant for African economies in general and Ethiopia in particular. It attempts to document the main theoretical linkages of saving to major macro-economic aggregates and the factors that determine saving at the micro-economic or household level, examine the existing empirical evidence, present a new estimated result conducted in the context of this study. The literature as well as the empirical finding in this study shows that saving is positively related to income level or growth, rate of investment, and short-run changes in terms of trade. On the other hand, more it is negatively related to macroeconomic instability, foreign aid, and age-dependency ratio.
Estimating Aggregate Production Function with I(2) Capital Stock
Section: Articles Keywords: Production function, I(2) variable, cointegration One of the most important features of estimating a production function is the presence of an I(2) capital stock series. Given the empirical regularity that the first difference of capital stock -i.e. investment- is an I(1) series, capital stock tends to have a double unit root. Using Ethiopian data from 1960/61 to 2001/02, we showed that the existence of cointegrating relationship is rejected under the I(1) analysis while the I(2) analysis fail to reject the existence of cointegrating relationship. This indicates the possibility of polynomial cointegration. We also argued that the polynomial cointegration can be motivated theoretical apart from being an empirical issue alone.
Production function, I(2) variable, cointegration
Influence of Micro-Finance Services on Farm Households Income: The Case of Oromia Credit and Saving Share Company–Kuyu Branch, Ethiopia
Section: Articles Keywords: Determinants, micro-finance, clientele, credit, logit model, Ethiopia The paper analyzes the influence of microfinance services in improving economic performance of farm households using data collected from 100 randomly selected households. Descriptive analysis of the changes in income level between the baseline and survey year was made whereas binary logit model was used to analyze the determinant of incremental income. The results revealed the existence of improvement in the household income of the clienteles. Microfinance service related variables such as proper utilization of the disbursed loan, average loan size, appropriateness of loan disbursement schedule, and access to required amount of loan were found to be significant factors influencing the incremental income of the clientele. Other determining factors include land holding, shortage of draught animals, and distance to market. The policy implications of the results tend to emphasize on the importance of supervision of loan service, improved loan schedules, proper identification of feasible business plan, income diversification of the clientele, and strengthening market access.
Determinants, micro-finance, clientele, credit, logit model, Ethiopia
Intensification and Crop Commercialization in Northeastern Ethiopia
Section: Articles Due to low farm production and productivity the majority of subsistence farmers in Ethiopia are not self-sufficient in food, and deliver meager amounts of farm output to consumers and agro-processing industries. Agricultural growth, an important pathway to food security, is realized through increases in per capita farm endowments (physical and financial assets and resources) and adoption of appropriate and proven technology and requires a transformation out of the semi subsistence, low-input and low-productivity agriculture into a high productivity commercial agriculture. This article investigates farm commercialization from two perspectives - output oriented and input-oriented farm commercialization. Logistic model was applied to examine factors of commercial participation and use of chemical fertilizer, while Cob Douglass production function was employed for the analysis of production determinants. The data used for the analysis was collected from farm households sampled from communities in Northeastern Ethiopia. The regression analysis of commercialization asserts that lack of market access (measured by distance) and engagement in livestock and off-farm employment significantly and negatively impact food crop commercialization. Total food crop production has been found to impress a strong and significant effect on commercialization. The production analysis indicated that farm size operated and technology (chemical fertilizer) are the most important production factors under the context of the study areas. Results of estimation of fertilizer use show the important and positive role of access to oxen and credit, and size of operated farm.
The Implications of Asset Ownership on Child Work in Rural Ethiopia
Section: Articles Children have always been working in industries and enterprises, in shops and stores, on farms and plantations, in domestic homes and habitats, on roads and streets, and in restaurants and hotels. There is by now a virtually unanimous view that poverty is the main, although not the only, cause of child labour. Even altruistic parents who care about the welfare of their children can thus be forced to see their children working because of poverty. If work participation exceeds an acceptable threshold level, the normal development of children could be seriously affected. The main aim of this paper is to provide empirical evidence on the link between asset ownership and child work in the context of a subsistence rural economy. The results show that most children in rural Ethiopia perform some form of work either in the house or on the farm. Although access to physical asset is expected to raise household income and create an incentive for school attendance, it might reduce school attendance and increase the probability of work unless accompanied by technological development. Policies that encourage school participation and help to improve the income generating potential of households and the provision of productive assets to create a more stable economic base are needed to reduce the engagement of children in work activities.
Does Schooling Influence Productivity? The Case of Ethiopian Manufacturing Enterprises
Section: Articles An empirical investigation was conducted to verify whether schooling influences productivity in the Ethiopian Public Manufacturing Industries. The results indicate that schooling influences the productivity of manufacturing enterprises significantly; viz, the higher the proportion of the labour force with a high level of schooling in an enterprise, the higher is productivity. This implies that increasing the proportion of social wealth expended on education is paying and that the education system in Ethiopia seems effective in translating skilled manpower into services. This, in turn, implies that not only broadening schooling in terms of quantity, but also deepening schooling by fostering quality could increase the productivity of manufacturing enterprises. Thus, government has to intervene in supplying skilled manpower since there is a serious risk of private under-investment in training at a firm level. However, for successful industrialisation to take place, any government move to supply these resources should involve the beneficiaries in order to balance demand and supply; give emphasis to tertiary education as strongly as basic education; and synchronise with other supportive schemes since human capital investment on its own cannot lead to the industrialisation of a country.