Aspirations may condition the future-oriented choices of individuals and thus may play a role in the persistence of poverty or the effort to break out of it. We run a randomized controlled trial in remote, rural Ethiopia to explore this and evaluate an intervention that aims to change how poor people perceive their future opportunities, alter their aspirations, and through that, modify their investment decisions. A treatment group was shown video documentaries featuring individuals from similar communities who escaped poverty through their own efforts and who serve as relatable role models. Five years after the screening took place, the treated households had increased future-oriented investments in agriculture, children's education, and assets. The results can be explained by an increase in aspirations in terms of lifetime goals. Overall, this research uniquely provides evidence that a light-touch behavioural intervention can have persistent economic impacts on a poor population.

Targeting is an important but challenging process in the design and delivery of social and humanitarian assistance programs. Community-based targeting (CBT) that uses community leaders as targeting agents is often preferred for their local information advantages, especially when data-driven methods are not feasible. However, it remains unclear how different CBT approaches fare under different constraints and contexts. Specifically, how do community leaders target and allocate resources under different resource constraints and discretion? We implemented a cluster-randomized controlled trial among community leaders in 180 villages in Ethiopia to evaluate how community leaders target and allocate resources under different budget constraints and discretion. We find that, when resources are limited, community leaders prefer to increase the number of beneficiaries by reducing the average transfer amounts. Community leaders appear to minimize exclusion errors even at the expense of increased inclusion errors. Consistent with this, we find that granting community leaders some level of discretion allows them to reduce exclusion errors and include households that are materially deprived or living in conflict-affected settings. Finally, community leaders are more vulnerable to favoritism when the budget is larger and they lack discretion. These findings offer important lessons that can inform targeting in the context of increasing budget pressures and cuts.

This paper examines the effects of shocks on temporal stability of risk and time preferences of rural households within a developing country context characterized by frequent droughts, chronic food insecurity, and low levels of education. Leveraging a three-wave large and diverse household panel data that elicits preferences every two years for more than 6,500 individuals from over 5,600 sample rural households in Ethiopia, we analyze the effects of droughts (self-reported) and rainfall shortfalls on household risk and time preferences. Our findings show that households become more risk-averse and impatient after experiencing drought and rainfall shocks; the change in risk preferences is more notable among households that experience recurrent droughts and multiple covariate shocks during the same period.

A growing literature in economics has analysed the effects of psychological interventions designed to boost individual aspirations as a strategy to increase households' propensity to make long-term investments and thus reduce poverty. This paper reports on a randomised controlled trial evaluating a short video-based intervention designed to increase aspirations of adults in poor rural Ethiopian households who are beneficiaries of the Productive Safety Net Program, the main government safety net program in Ethiopia. Evidence from a sample of 5,258 adults from 3,220 households is consistent with the hypothesis that there are no significant effects of the intervention on self-reported aspirations for the household, educational investment in children, or savings nine months post-treatment. This suggests that the effect of light-touch aspirations treatments for extremely poor adults may be limited in this context.

ABSTRACTOver the past two decades national and other large‐scale social assistance programmes have multiplied across sub‐Saharan Africa. These programmes require considerable human resource capacity, institutional arrangements and systems of identifying eligible people, as well as delivery structures and mechanisms. Several countries have sought to extend programmes to areas at the margins of state power where governance and administration reflect negotiated arrangements involving a range of state and non‐state and informal actors. This includes Ethiopia, where the Productive Safety Net Programme (PSNP) has expanded across the country's lowland Afar and Somali regions. This article examines evidence concerning the targeting of PSNP transfers in these predominantly pastoral and agro‐pastoral regions. While quantitative evidence indicates that the wealthy are as likely to be programme beneficiaries as the poorest, despite investments in establishing and providing training for local‐level targeting structures, local perspectives are that the right households are targeted. The authors explain this apparent paradox in relation to distributional politics nested within clan‐based social networks in the context of limited statehood. Formal systems of provisioning social assistance are negotiated and reconfigured, in acceptable ways, through local agency. The PSNP lowland experience calls into question the limits of ‘technocratic approaches’ and underscores the need to understand social norms and preferences in design and implementation of social assistance programmes.

The COVID-19 impact on the global economy combined with partial lockdown measures in Ethiopia represents a large, unprecedented shock to the country's economy. The social accounting matrix (SAM) multiplier model, built on the most up-to-date SAM (2017) for Ethiopia, shows that the country suffered a 14.3% loss in GDP (Birr 43.5 billion or US$1.9 billion) during the lockdown period compared to the no-COVID case during the same period. Nearly two-thirds of the losses come from the services sector. Although no direct restrictions were imposed on the agriculture sector, which is the primary means of livelihood for most, the sector faces a 4.7% loss in output due to its linkages with the rest of the economy. We find dissimilar income and poverty effects across households by income quintile and level of urbanization. The study also considers two recovery scenarios and generates relevant insights on the potential impacts of COVID-19 by the end of 2020. The earmarked relief and recovery plan resources can only help the economy to recover if targeted in an efficient way towards sectors most affected by COVID-19, and further resources are mobilized to support strategic sectors-those with the highest economywide multiplier effects-and vulnerable communities.

In Ethiopia, as in much of sub-Saharan Africa, the first known case of coronavirus arrived in mid-March (on March 13, 2020), weeks after the pandemic had spread rapidly in parts of Europe and the United States. The government swiftly imposed restrictions to slow the spread of the virus, closing schools (on March 16, 2020), limiting travel and encouraging people to remain at home. Such restrictions were needed to keep the pandemic from overwhelming a healthcare system with limited capacity to respond to an infectious disease outbreak. Only limited information is available about the effect of these restrictions on economic activity, food security and livelihoods in Ethiopia. A survey of residents of Addis Ababa conducted in May 2020 found that more than half of households reported lower-than-expected incomes and more than one third were extremely stressed about the situation. These results further showed that poorer households were more severely affected, although the food security situation in Addis, while declining, was not yet dire.

Chapter 13, “Public Investments and Poverty Reduction,†presents results of general equilibrium simulations of the impacts of alternative investment strategies, focusing on national income (GDP) and incomes of the poorest 40 percent of the population in both rural and urban areas. These simulations, which incorporate the major factors discussed in this book—including land constraints, productivity growth, migration, expanding markets, rising incomes and consumption, and greater urbanization—show that although urban investments generate faster economic growth and structural transformation, investments in the rural economy are likely to continue to be more pro-poor than urban public investments through the mid-2020s. After the mid-2020s, investments in cities become more pro-poor. The authors show that though rapid economic growth and structural transformation have diminished the relative importance of the agricultural sector in Ethiopia’s economy, continued public investments in agriculture and the broader agrifood system remain crucial for equity and poverty alleviation (and for a reduction of food import dependency) in Ethiopia.

In this paper, we analyze the economic impacts of response measures adopted in Ethiopia to curtail the spread of the COVID-19 pandemic. We carry out simulations using an economywide multiplier model based on a 2017 Social Accounting Matrix (SAM) for the country that properly depicts interactions between economic agents. The pandemic’s impact on the global economy combined with disruptions it causes in Ethiopia represents a large, unprecedented shock to the country’s economy. In such situations, a SAM-based multiplier model provides an ideal tool for measuring the short-term direct and indirect impacts of a shock on an economic system since there is limited room for proper adjustment of economic decisions. We model the seven-week partial lockdown policy implemented in Ethiopia from mid-March to early May 2020. We also consider two possible economic recovery scenarios that may emerge as the COVID-19 control policies are relaxed during the latter part of 2020 in order to generate insights on the potential continuing impact of the virus at the end of 2020. Although the country took early swift measures, our assessment of the partial lockdown measures suggests that they were not as strict as those observed in other Africa countries. Accordingly, our estimates of the economic costs of COVID-19 on Ethiopia are significantly lower than those reported for other countries on the continent. We estimate that during the lockdown period Ethiopia’s GDP suffered a 14 percent loss (43.5 billion Birr or 1.9 billion USD) compared to a no-COVID case over the same period. Nearly two-thirds of the losses were in the services sector. Although no direct restrictions were imposed on the agriculture sector, which serves as the primary means of livelihood for most Ethiopians, the sector faced a 4.7 percent loss in output due to its linkages with the rest of the economy. Poor export performance due to a slowdown in global trade and restrictions on the transport sector also partly explain the decline in agricultural output. The broader agri-food system also was affected considerably because of its linkages with the rest of the economy. In terms of the welfare of Ethiopians, we estimate that the economic impacts during the lockdown caused 10.1 million additional people to fall below the poverty line. These findings have implications for better understanding the direct and indirect impacts of COVID-19 and for policy design during the recovery period to return Ethiopia’s economy to a normal growth trajectory and to protect the livelihoods of the most vulnerable in the process.

The COVID-19 pandemic is expected to considerably affect the Ethiopian economy directly and indirectly due to global shocks and to the different restrictive preventative measures the country is taking. We analyze these economic effects using multisector economywide income multiplier models built on the two latest Social Accounting Matrices (SAMs) developed for Ethiopia. Three external sector channels are the focus of the analysis: commodity exports, strategic imports, and remittances. Results indicate that in the absence of any policy responses, the Ethiopian economy is expected to experience a loss of approximately 4.3 to 5.5 percent of its annual GDP due to exports, strategic imports, and remittances that are one-third lower relative to the no-COVID situation over a period of six-months. This translates into estimated reductions in labor income of between 4.2 and 5.2 percent. The SAM multiplier model estimates also imply that these negative shocks lead to household income losses that amount to between 3.9 and 6.4 percent. In particular, the urban poor will be the most affected as they lose real incomes in the range of 6.6 to 8.5 percent. These income losses are estimated to result in a 3.5 percentage point rise in the national poverty headcount.

View help for Summary We report on an experiment with poor rural households in Ethiopia, which aimed to boost aspirations for a better future through exposure to documentaries featuring local male and female role models. We explore effects on parents' educational aspirations and investment in children's education. At baseline, educational aspirations are high but biased against girls. At a six-month follow-up, the intervention increased parents' aspirations for their children's education and increased enrollment, time spent in school, and schooling expenditures. There was no catching up of girls relative to boys. Results are consistent with broader local social norms that value education but disfavor women.

The livestock subsector has contributed little to the remarkable economic growth recorded in Ethiopia in the last decade. In an effort to stimulate livestock production, the Ethiopian government has recently recognized livestock as an important strategic subsector in which to invest. Unlike most studies that focus purely on aspects of livestock production, this study provides a detailed descriptive assessment of the livestock production and marketing behavior of smallholder mixed crop-livestock farmers. The study uses a dataset collected in the Agricultural Growth Program baseline survey from farm households in districts of Ethiopia with high potential in grain crops production, areas which have a significant share of the livestock in the country. Smallholder livestock production is characterized by lower levels of livestock ownership, limited market orientation, and lower productivity. These characteristics restrict the capacity of these livestock systems from taking advantage of the emerging opportunities in both domestic and export livestock markets. We find a high degree of heterogeneity in access to livestock assets, production practices, marketing, and livelihood strategies among farm households. Hence, a single policy recommendation might not work for all farmers. Our assessment apprises the current status of livestock production systems in Ethiopia and highlights potential income sources from livestock, including positive synergies between these income sources to help reduce poverty and to promote economic growth in rural communities.