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Rural Livelihoods, Poverty, and the Millenium Development Goals

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Rural Livelihoods, Poverty, and the Millenium Development Goals Environment for Development Discussion Paper Series June 2008 EfD DP 08-07 Rural Livelihoods, Poverty, and the Millennium Development Goals Evidence from Ethiopian Survey Data Randall Bluffstone, Mahmud Yesuf, Bilisuma Bushie, and Demessie Damite Environment for Development The Environment for Development (EfD) initiative is an environmental economics program focused on international research collaboration, policy advice, and academic training. It supports centers in Central America, China, Ethiopia, Kenya, South Africa, and Tanzania, in partnership with the Environmental Economics Unit at the University of Gothenburg in Sweden and Resources for the Future in Washington, DC. Financial support for the program is provided by the Swedish International Development Cooperation Agency (Sida). Read more about the program at www.efdinitiative.org or contact [email protected]. Central America Environment for Development Program for Central America Centro Agronómico Tropical de Investigacíon y Ensenanza (CATIE) Email: [email protected] China Environmental Economics Program in China (EEPC) Peking University Email: [email protected] Ethiopia Environmental Economics Policy Forum for Ethiopia (EEPFE) Ethiopian Development Research Institute (EDRI/AAU) Email: [email protected] Kenya Environment for Development Kenya Kenya Institute for Public Policy Research and Analysis (KIPPRA) Nairobi University Email: [email protected] South Africa Environmental Policy Research Unit (EPRU) University of Cape Town Email: [email protected] Tanzania Environment for Development Tanzania University of Dar es Salaam Email: [email protected] Rural Livelihoods, Poverty, and the Millennium Development Goals: Evidence from Ethiopian Survey Data Randall Bluffstone, Mahmud Yesuf, Bilisuma Bushie, and Demessie Damite Abstract This paper provides an in-depth look at some of the key development issues facing households in Ethiopia, in the context of the Millennium Development Goals (MDG). Using household survey data from 2000, 2002, and 2005, we found that Ethiopia is making progress toward some vital MDG goals, but household incomes are shockingly low and hugely varied. Assets could potentially help smooth consumption when incomes vary, but because land is owned by the government, it cannot serve as a true, functioning asset. The current property rights structure excessively limits households’ options. Key Words: Millennium Development Goals, rural poverty, Africa, Ethiopia JEL Classification Numbers: I31, I32, I38 © 2008 Environment for Development. All rights reserved. No portion of this paper may be reproduced without permission of the authors. Discussion papers are research materials circulated by their authors for purposes of information and discussion. They have not necessarily undergone formal peer review. Contents Introduction............................................................................................................................. 1 1. Literature on Outcomes and Contributors to Poverty in Low-Income Countries ...... 5 2. Description of Data and Study Sites................................................................................. 6 3. Results ................................................................................................................................. 7 3.1 Household Makeup and Education .............................................................................. 8 3.2 Income........................................................................................................................ 10 3.3 Credit.......................................................................................................................... 14 3.4 Assets ......................................................................................................................... 15 3.5 Access to Clean Water and Sanitation....................................................................... 22 3.6 Health and Vaccinations ............................................................................................ 25 3.7 Social Capital and Group Coping Mechanisms......................................................... 27 4. Conclusion ......................................................................................................................... 29 References.............................................................................................................................. 31 Environment for Development Bluffstone et al. Rural Livelihoods, Poverty, and the Millennium Development Goals: Evidence from Ethiopian Survey Data Randall Bluffstone, Mahmud Yesuf, Bilisuma Bushie, and Demessie Damite∗ Introduction Ethiopia is synonymous with poverty and hunger in worldwide parlance. Its relentlessly low incomes and major famines that have occurred every decade since the 1970s have engrained this impression in the popular psyche. With gross national income per capita a mere US$ 160 per year, Ethiopia’s average income is much less than $1 per person per day, placing it 202nd out of 208 countries (World Bank 2006). Adjusting for purchasing power parity (PPP) increases the gross national income per person to approximately $1000, but this is still less than $3 per day: Ethiopia’s rank climbs slightly to 193rd of 208 countries (World Bank 2006). In 2006, Ethiopia ranked 170th of 177 countries in the Human Development Index (UNDP 2006). Furthermore, there is high variability in output, particularly in the agricultural sector, which employs over 85 percent of Ethiopians (MOFED 2004). For example, although agricultural output increased by 11.5 percent during 2000–2001, year-on-year output growth fell by 2.3 percent in 2001–2002 plus an additional 12.6 percent in 2002–2003, before increasing 18.9 percent the following year. Contractions in the agricultural sector and, indeed, the economy as a whole are due to lack of rain on which Ethiopian agriculture almost wholly depends. ∗ Randall Bluffstone, Portland State University, Department of Economics, PO Box 751 Portland, Oregon 97207- 0751, (tel) 503-725-3938, (fax) 503-725-3945, (email) [email protected]; Mahmud Yesuf, Environmental Economics Policy Forum for Ethiopia, Ethiopian Development Research Institute, Blue Building/Addis Ababa Stadium, P.O. Box 2479, Addis Ababa, Ethiopia, (tel) + 251 11 5 506066, (fax) +251 115 505588, (email) [email protected]; Bilisume Bushie, Addis Ababa University, Department of Economics, P.O.Box 1176, Addis Ababa, Ethiopia, (tel) +251 11 1223776, (email) [email protected]; Demessie Damite, Environmental Economics Policy Forum for Ethiopia, Ethiopian Development Research Institute, Blue Building/Addis Ababa Stadium, P.O. Box 2479, Addis Ababa, Ethiopia, (tel) + 251 11 5 506066, (fax) +251 115 505588, (email) [email protected]. The authors would like to thank Sida (Swedish International Development and Cooperation Agency) and Gothenburg University for financial support and the Department of Economics at Addis Ababa University for making the data available. They also thank EDRI colleagues Teki Alemu for his work on data collection and management, Alemu Mekonnen for detailed comments on a draft of this paper, and Mulugeta Tadesse for developing the map showing the survey sites, and the participants in EDRI seminars for their thoughtful comments. 1 Environment for Development Bluffstone et al. The purpose of this paper is to use detailed household data to analyze household incomes in a typical rural region of Ethiopia and give meaning and context to some of the above statistics. Reducing poverty and its correlates is now at the top of the international policy agenda. This is perhaps best illustrated by the eight Millennium Development Goals (MDGs), which were adopted unanimously by United Nations member nations in September 2000 and focus on improving human well-being in a variety of dimensions. (The eight MDG goals are listed in box 1, along with five targets that are most relevant to this paper.) There are 18 targets for the MDGs, seven of which relate to goal 8 and deal with issues of development assistance, market access, and debt relief for developing countries. However, perhaps the most crucial goal is to reduce extreme poverty1 and hunger. Box 1 Millennium Development Goals and Targets Relevant to This Paper 1. Eradicate extreme poverty and hunger Relevant target: Halve the proportion of people whose income is less than $1 per day by 2015. 2. Achieve universal primary education Relevant target: Ensure that by 2015 children everywhere, boys and girls alike, will be able to complete a full course of primary schooling. 3. Promote gender equality and empower women 4. Reduce child mortality Relevant target: Reduce by two-thirds the mortality rate for children under 5 years of age. 5. Improve maternal health 6. Combat HIV/AIDS, malaria, and other diseases Relevant target: By 2015, halt and begin to reverse the incidence of malaria and other major diseases. 7. Ensure environmental sustainability Relevant target: Give everyone sustainable access to safe drinking water and sanitation. 8. Develop a global partnership for development The official definition of poverty in Ethiopia is much less stringent than the MDG definition. In Ethiopia, the poverty line is US$ 0.36 per adult-equivalent per day and extreme 1 Extreme poverty is defined as an income of less than US$ 1 per person per day (United Nations 2003). 2 Environment for Development Bluffstone et al. poverty is $0.27 per person per day.
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