Ethiopia: Role of Agriculture in Poverty Reduction in Ethiopia

The international media agree up on confirming that Ethiopia is becoming one of the leading economies in the world. In connection to this, the recent Poverty Reduction Assessment by the World Bank also confirms Ethiopia’s success in scoring high economic achievement in reducing poverty. Agricultural growth drove reductions in poverty contributes a great deal. Since the government of Ethiopia designed and began implementing agricultural-led industrialization economy, Ethiopian households have experienced a decade of progress in wellbeing.

Among these, life expectancy increased and progress was made towards the attainment of the Millennium Development Goals (MDG), particularly in gender parity in primary education, child mortality, HIV/ AIDS, and malaria. Women are now having fewer births: the total fertility rate fell from almost seven children per women in 1995 to just over four in 2011.. The share of population without education was also reduced considerably. Finally, the number of households with improved living standards measured by electricity, piped water, and water in residence highly improved.

Agricultural growth is likely to remain important in reducing poverty. Agricultural output growth was found to explain a large part of Ethiopia’s success in reducing poverty, and given the large share of households still engaged in agriculture, this trend is likely to continue. The analysis offers insights on the nature of agricultural growth and the interplay between growth in agriculture and growth in other sectors. Agricultural growth will have a larger impact on poverty reduction if it is complemented by growth in urban, or non-agricultural, demand. The results show that the strong relationship between agricultural growth and poverty reduction is conditional on access to urban demand. Agricultural households more proximate to urban centers can more easily consume goods and services from urban centers and supply goods and services to these markets. Increased urban demand can also put increasing upward pressure on cereal prices, which the analysis suggests may help poverty reduction. This is consistent with the finding of Diao et al. (2012) that simultaneous growth in agriculture and non-agriculture will bring about the fastest declines in poverty rates. Reducing transportation costs will also reduce the cost of fertilizer in more remote locations, which may help encourage further agricultural growth.

Adoption of agricultural technologies can reduce poverty, but their effectiveness is dependent on good prices and good weather. Increased use of improved inputs was beneficial for poverty reduction when good weather conditions and favorable crop prices prevailed. The analysis confirms other studies showing that fertilizer, improved seeds and production practices have the potential to stimulate agricultural growth in Ethiopia.

Few household heads report being wage employees, however households that do rely on wage labor income are impacted by rising food prices in the short run until wages adjust some 4-5 months later. If higher producer prices are also reflected in higher retail prices, they will hurt food buyers unless there is compensatory intervention to improve their wellbeing. Improvements in market efficiency can help both net producers and consumers by increasing producer’s share of the retail price. Further infrastructure investments and improvements in competition in cereal markets will further improve market efficiency. Researches suggest that in particular,investments that allow the last miles of access to be improved are needed.

Reducing the gender agricultural productivity gap in Ethiopia is another way in which inclusive agricultural growth can be encouraged in Ethiopia. The analysis also details the types of interventions that will help ensure that female-headed households are able to see increases in agricultural productivity. In particular, the analysis shows that interventions that help female farmers access land for cultivation and hire agricultural labor will help lower the gender productivity gap. It also shows that addressing sources of gender-bias in the types of crops women and men market may be important, and would help female farmers realize higher returns on inputs such as fertilizer.

Manufacturing growth may play an increasing role in poverty reduction as Ethiopia urbanizes. In urban areas, manufacturing output growth was a more important driver of poverty reduction in recent years indicating that growth in this sector may be important for poverty reduction.

Poverty reduction in the service sector has contributed to overall poverty reduction, but its contribution has been somewhat lower than its large contribution to GDP growth would indicate. Service sector growth has not had an independent effect on poverty reduction perhaps because service sector growth has been strongly correlated with agricultural growth. Growth in agriculture and services has gone hand in hand.

Please wait...

Subscribe to our newsletter

Want to be notified when our article is published? Enter your email address and name below to be the first to know.