Rural Household Poverty and Vulnerability to Poverty in Oromiya, Ethiopia

Abstract

This study is based on secondary data from HICES and WMS 2004/05 collected by CSA. The study has tried to examine the extent of poverty and vulnerability of households in rural Oromiya. It further looks through the determinants of poverty and vulnerability. Using the Foster, Greer and Thorbecke (FGT) poverty indices, the descriptive analysis of poverty indices revealed that 38.84% of the sampled households in the region are poor. A measured household poverty is decomposed into transient and chronic poverty and majority of the poor are chronically poor. The vulnerability to poverty of households in the region is also found to be high as a substantial share of those currently above the poverty line are highly vulnerable to poverty in the future. The Logit model is used to investigate the determinants of poverty and vulnerability. From the estimation result educational attainment of the head, household size, location of residence in the region, are found to be the key determinants of poverty in the region. The results show that poverty is not the same as vulnerability. So in designing policies one should take note of the diverse nature of poverty and vulnerability. For the chronically poor who lack economic assets, priority should be given to reduction of consumption fluctuations and building up assets through a combination of protective and promotional programmes. On the other hand, the transient poor and high vulnerable non-poor poor households are most likely to benefit from combination of prevention, protection, and promotion which would give them a more secure base to diversify their activity into higher-return, return, higher risk activities. Therefore ex ante measures to prevent households from becoming poor as well as ex post measures to alleviate those already in poverty should be combined in evaluating poverty reduction strategies.