Growth and chronic poverty Evidence from rural communities in.pdf

CSAEWorkingPaperWPS/201118 Growth and chronic poverty: Evidence from rural communities in Ethiopia Stefan Dercon John Hoddinott Tassew Woldehanna May 2008 April 2009 December 2009 January 2011 This version June 2011 What keeps some people persistently poor, even in the context of relative high growth? In this paper, we explore this question using a 15-year longitudinal data set from Ethiopia. We compare the findings of an empirical growth model with those derived from a model of the determinants of chronic poverty. We ask whether the chronically poor are simply not benefiting in the same way from the same factors that allowed others to escape poverty, or whether there are latent factors that leave them behind? We find that this chronic poverty is associated with several initial characteristics: lack of physical assets, education, and ‘remoteness’ in terms of distance to towns or poor roads. The chronically poor appear to benefit from some of the drivers of growth, such as better roads or extension services in much the same way that the non-chronically poor benefit. However, they appear to have lower growth in this period, related to time-invariant characteristics, and this suggests that they face a considerable growth and standard of living handicap. 1. Introduction In recent years, many African countries have experienced faster growth. Have all, some or few poor households benefited from this growth? We address this question using a unique 15 year household panel data set from Ethiopia. Several intertemporal measures all show considerable ‘chronic’ poverty in