Abstract

The Ethiopian government has boldly set very rapid and sustainable growth and its equitable distribution as its prime development objective to end poverty in the foreseeable future. For this reason, promoting agricultural and rural development has been purported by the government as its top development agenda since it took power some 19 years back. Yet the extent to which the government realizes this objective remains in doubt. This paper attempts to analyze the dynamic relationships among poverty, inequality and growth. While many of the available studies use aggregate cross-country data sets, this study, however, uses household panel data-set. The decomposition result indicates that the observed growth was neither rapid nor sustainable. Poverty and inequality have not also declined considerably except between 1995 and 1997. The study also systematically generated 90 observations of indices from the five rounds to estimate Fixed Effect (FE) regression model. The estimated growth and inequality elasticities of poverty were found equal to 3.32 and -3.68, respectively. What this means is that poverty could still remain high if the country fails to achieve rapid and sustainable growth, on the one hand, and simultaneously reduce inequality, on the other.  

Key words: Inequality, poverty, growth, fixed effects.