Poverty in Ethiopia: worrying patterns of persistence

Ending poverty through economic growth has been central in Ethiopia’s national development plans and strategies since the early 2000s. The two most recent national household surveys show that, between 2010/11 and 2014/15, the proportion of people living below the national poverty line fell by a fifth (from 30% to 24% of the population), in line with rapid growth in GDP. These top-level trends suggest that Ethiopia has made significant progress. But with COVID-19, the Tigrayan conflict and other shocks threatening to erode hard-won gains, we need to know much more about the how the situation of individual households changes over time and what factors might be associated with these changes.

By applying advanced statistical methods and modelling to existing cross-sectional household survey data, known as ‘synthetic panel analysis’, we have been able to generate in-depth insights into poverty mobility and vulnerability in Ethiopia. Our findings reveal a worrying level of poverty persistence: while the country’s overall poverty rate declined between 2010/11 and 2014/15, 64% of households that were ‘poor’ at the start of this period were Moreover, when we introduce a distinct category of ‘vulnerable non-poor’, we see that of those households that did move out of poverty during this period, two-thirds remained at risk of falling into poverty in the event of adverse shocks or stresses.

The picture is somewhat more positive when we compare upward and downward transitions: just 9% of households that were not poor in 2010/11 fell into poverty in 2014/15 (a far smaller proportion than the 36% of poor households that escaped poverty). It is also a smaller proportion than the 12% of poor households that moved from below the poverty line to a position of relative economic security. Meanwhile, upward mobility was the most likely transition (46%) for vulnerable households – that is, from vulnerable to secure.

Yet vulnerability in Ethiopia is a significant concern; one in five vulnerable households were likely to have fallen into poverty over the period studied, and one in three remained vulnerable to impoverishment. Together with the high levels of poverty persistence, this makes for a worrying picture – particularly given the period studied was one of rapid economic growth in the country. Since then, Ethiopia has experienced numerous shocks and stresses that increase household vulnerability including ongoing conflict, prolonged droughts, locust swarms and the COVID-19 pandemic. The country is also heavily reliant on rainfed agriculture, and as the climate crisis increases rainfall variability, this will impact income and food security – especially in rural areas.

It is critical, then, to focus poverty reduction strategies on not only households experiencing persistent poverty but also those that are vulnerable to poverty over the longer term. Synthetic panel analysis can help us to identify the household characteristics that are associated with movements into and out of different states of poverty – and therefore suggest where such strategies might be most effective. For example, we find that households in which the household head has a secondary education are about 20% less likely to be poor in both periods. When we combine this information with early evidence on the impact of COVID-19, we can reveal emerging priorities for policy.

Overall, we find that in Ethiopia were most likely to face persistent poverty and downward mobility before the pandemic and those that have been most affected by the early socioeconomic impacts of COVID-19: domestic workers, and people engaged in the services sector (e.g. hotels, restaurants and transport). Domestic workers, in particular, were extremely likely to face persistent poverty (80%) – well above the average likelihood (64%) and more than twice as likely as public sector and NGO employees.

There is an immediate need to limit the economic impact of the pandemic on urban areas, which studies show have been especially hard-hit by lockdowns, border closures and other containment measures. Our analysis finds that although urban households were less likely than rural households to face persistent poverty before the pandemic, the probability of poor urban households staying poor is still high overall, at 43%.

At the same time, support to rural areas needs to continue. Rural households – particularly those connected to urban markets or reliant on remittances from urban workers – have also been affected by the pandemic and may be less well positioned to cope given their already high likelihood of experiencing persistent poverty (68%). Vulnerable rural households are also more than twice as likely as urban households to fall into poverty, putting them at significant risk from the longer-term impacts of the pandemic on economic growth, human health and wellbeing.

Read the full paper here.