The Determinants and Impacts of Income Diversification in Rural Ethiopia: the Case of Communitties in Southern Nations, Nationalities, and Peoples Regional State
ADDIS ABABA UNIVERSITY
SCHOOL OF GRADUATE STUDIES
THE DETERMINANTS AND IMPACTS OF INCOME
DIVERSIFICATION IN RURAL ETHIOPIA: THE
CASE OF COMMUNITTIES IN SOUTHERN
NATIONS, NATIONALITIES, AND PEOPLES
REGIONAL STATE
A thesis submitted to the School of Graduate Studies of Addis Ababa University in Partial fulfillment of the Requirements for the Degree of Master of Science in Economics (Economic Policy Analysis)
BY
DEMISSIE DAMITE
Supervisor: Dr. Workneh Negatu
ADDIS ABABA
July 2003 i i
Table of contents
Page
Table of Contents i
List of Tables iii
Acknowledgment iv
Abstract v
CHAPTER 1. INTRODUCTION
1.1 Background 1
1.2 Problem Statement 4
1.3 Objectives and Significance of the Study 7
1.4 Organization of the thesis
CHAPTER 2. LITERTURE REWIEW
2.1 Conceptual Framework
10
2.2 Empirical Literature on Patterns and Determinants of Income Diversification 13
2.3 Empirical Evidences of Effects of Income Diversification 21
2.4 Empirical Literature on Ethiopia 31
CHAPTER 3. METHODOLOGY AND MODEL SPICIFICATION
3.1 Data Sources 38
3.2 Theoretical Framework and Model Specification for Determinants of 39
Income Diversification
3.3 Theoretical Framework and Model Specification for Consumption Insurance 51
3.4 Framework for Analysis of Income Distribution and Welfare Level 56
CHAPTER 4. EMPIRICAL ANALYSIS
4.1 Description of Study Area and Survey Data
1.2 Description of the S.N.N.R. State 60
4.1.1 Description of Study Area 68
4.1.2 Description of Data Set 70 i i i
4.2 Estimation Results and Discussion
4.2.1 Empirical Results for Determinants of Income Diversification 85
4.2.2 Empirical Results for Consumption Smoothing and Diversification 103
4.3 Analysis of Income, Income Inequality and Diversification. 107
CHAPTER 5. SUMMARY AND POLICY IMPLICATIONS
5.1 Summary of Results 120
5.2 Policy Implication 128
REFERENCES 135
APPENDICES 140
DECLATION SHEET i v
List of Tables
Table
Page
Table 4.1: Regional (SNNPRS) Gross Domestic Product
SCHOOL OF GRADUATE STUDIES
THE DETERMINANTS AND IMPACTS OF INCOME
DIVERSIFICATION IN RURAL ETHIOPIA: THE
CASE OF COMMUNITTIES IN SOUTHERN
NATIONS, NATIONALITIES, AND PEOPLES
REGIONAL STATE
A thesis submitted to the School of Graduate Studies of Addis Ababa University in Partial fulfillment of the Requirements for the Degree of Master of Science in Economics (Economic Policy Analysis)
BY
DEMISSIE DAMITE
Supervisor: Dr. Workneh Negatu
ADDIS ABABA
July 2003 i i
Table of contents
Page
Table of Contents i
List of Tables iii
Acknowledgment iv
Abstract v
CHAPTER 1. INTRODUCTION
1.1 Background 1
1.2 Problem Statement 4
1.3 Objectives and Significance of the Study 7
1.4 Organization of the thesis
CHAPTER 2. LITERTURE REWIEW
2.1 Conceptual Framework
10
2.2 Empirical Literature on Patterns and Determinants of Income Diversification 13
2.3 Empirical Evidences of Effects of Income Diversification 21
2.4 Empirical Literature on Ethiopia 31
CHAPTER 3. METHODOLOGY AND MODEL SPICIFICATION
3.1 Data Sources 38
3.2 Theoretical Framework and Model Specification for Determinants of 39
Income Diversification
3.3 Theoretical Framework and Model Specification for Consumption Insurance 51
3.4 Framework for Analysis of Income Distribution and Welfare Level 56
CHAPTER 4. EMPIRICAL ANALYSIS
4.1 Description of Study Area and Survey Data
1.2 Description of the S.N.N.R. State 60
4.1.1 Description of Study Area 68
4.1.2 Description of Data Set 70 i i i
4.2 Estimation Results and Discussion
4.2.1 Empirical Results for Determinants of Income Diversification 85
4.2.2 Empirical Results for Consumption Smoothing and Diversification 103
4.3 Analysis of Income, Income Inequality and Diversification. 107
CHAPTER 5. SUMMARY AND POLICY IMPLICATIONS
5.1 Summary of Results 120
5.2 Policy Implication 128
REFERENCES 135
APPENDICES 140
DECLATION SHEET i v
List of Tables
Table
Page
Table 4.1: Regional (SNNPRS) Gross Domestic Product
References: Constant Factor Cost (1995-2000) in Million Birr) .........................................67 Table 4.2: Characteristics of Sampled Communities .........................................................69 The analysis of this study is based on data taken from “Ethiopian Rural Households Surveys”(1997 and 1999) conducted by the Department of Economics, Addis Ababa