Regional Agricultural Endowments and Shifts of Poverty Trap Equilibria: Evidence from Ethiopian Panel Data

We introduce new approaches to research on poverty traps, focusing on changes in patterns of equilibria over time and across regions, applied to the Ethiopia Rural Household Survey. We revisit the incidence of multiple equilibria using new nonparametric techniques; we also emphasize conditions of single equilibria that remain stagnant below the poverty line. We identify a single equilibrium in our initial interval (1994 – 1999) but find evidence that a second, higher equilibrium is emerging in the subsequent (1999 – 2004) interval. One of three major regions exhibits a deeply impoverished equilibrium that does not improve despite a national environment of pro-poor growth. IIEP Working Paper Series 2011-01 ∗Send correspondence to [email protected]. We would like to thank Shahe Emran, James Foster, John Hoddinott, Takashi Kurosaki, and participants at the Northeast Universities Development Consortium Conference at MIT (Nov. 2010), and seminars at GWU, Korea Institute for International Economic Policy (KIEP), Korea Institute for Industrial Economics and Trade (KIET), and Samsung Economic Research Institute (SERI) for valuable comments. Research support from the Institute for International Economic Policy at GWU is gratefully acknowledged. Regional Agricultural Endowments and Shifts of Poverty Trap Equilibria: Evidence from Ethiopian Panel Data Abstract We introduce new approaches to research on poverty traps, focusing on changes in patterns of equilibria over time and across regions, applied to the Ethiopia Rural Household Survey. We revisit the incidence of multiple equilibria using new nonparametric techniques; we also emphasize conditions of single equilibria that remain stagnant below the poverty line. We identify a single equilibrium in our initial interval (1994 – 1999) but find evidence that a second, higher equilibrium is emerging in the subsequent (1999 – 2004) interval. One of three major regions exhibits a deeply impoverished equilibrium that does not improve despite a national environment of pro-poor growth.We introduce new approaches to research on poverty traps, focusing on changes in patterns of equilibria over time and across regions, applied to the Ethiopia Rural Household Survey. We revisit the incidence of multiple equilibria using new nonparametric techniques; we also emphasize conditions of single equilibria that remain stagnant below the poverty line. We identify a single equilibrium in our initial interval (1994 – 1999) but find evidence that a second, higher equilibrium is emerging in the subsequent (1999 – 2004) interval. One of three major regions exhibits a deeply impoverished equilibrium that does not improve despite a national environment of pro-poor growth. JEL Classifications: O1, I3