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Understanding poverty dynamics in Ethiopia: Implications for the likely impact of Covid-19

Ending poverty through economic growth has been central in Ethiopia’s national development plans and strategies since the early 2000s. And top-level trends suggest that the country has made significant progress, with the proportion of people living below the national poverty line falling by a fifth between 2010/11 and 2014/15, from 30% to 24%. In this paper, we provide new insights into household-level movements into and out of different states of poverty and vulnerability during this period using national survey data. Our findings reveal a worrying level of poverty persistence: 64% of households that were ‘poor’ at the start of the period were likely to have remained ‘poor’ five years later. And of those households that did escape poverty (36%), two-thirds remained vulnerable to adverse shocks or stresses. 

Ordinarily, detailed insights into poverty dynamics would require panel data (repeated observations on the same households over time), which is not readily available and is expensive to collect. Instead, our analysis employs innovative statistical approaches to create a ‘synthetic panel’ from cross-sectional household survey data (repeated observations on different households over time). This approach allows us to look at how the situation of different households might change over time and the characteristics associated with that change. 

Our analysis finds that different transitions have been more or less likely for households that share certain characteristics – like the age or education level of the household head. Worryingly, we find that in Ethiopia there is significant overlap between the populations that 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, self-employed workers (including agricultural workers) and people engaged in the services sector (e.g. hotels, restaurants and transport). This has significant implications for Ethiopia’s pandemic response and recovery, and its poverty reduction strategies over the longer term.

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