ESSP Working Paper 123, by Paul Dorosh, James Thurlow, Frehiwot Worku Kebede, Tadele Ferede, and Alemayehu S. Taffesse.
Abstract: The effectiveness of agricultural growth in reducing poverty at the national level depends on several factors, including the productivity of the investments themselves and the structure of the economy – the level of urbanization, the share of agricultural sector in overall output and employment, and the main sources of incomes of the poor, among others. As these factors change over time, so will the impacts of agricultural investments on growth and poverty.
This paper explores these issues for Ethiopia utilizing an economy-wide computable general equilibrium (CGE) model based on a detailed social accounting matrix (SAM). We present the results of four alternative investment scenarios -- faster investment in i) cities; ii) crop agriculture; iii) the rural non-farm sector and agro-industry; and iv) livestock. The simulations suggest that investments in cities generate faster economic growth and structural transformation. However, given the large share of the population with incomes linked to agriculture and the rural economy, 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.
In short, 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 agri-food system remain crucial for equity and poverty alleviation in Ethiopia, as well as for reducing food import dependency. Download the PDF.
