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Agricultural Growth and
Poverty Reduction in Ethiopia:

A General Equilibrium Analysis
                     Paul Dorosh
  ...
Research Questions
• How much will poverty decline under the current
  growth path?
• What is the growth and poverty impac...
Methodology
• Dynamic CGE model (2005-2015)
• Many agricultural sectors
  – Based on district crop and livestock data
  – ...
The Data Base
EDRI Social Accounting Matrix 2004/05
  – Constructed as part of a project with the
    University of Sussex...
Agro-ecological Zones
  “Three” Ethiopias
Baseline Scenario Assumptions
• Agriculture
   – Land cultivated for each crop follows medium-term trends:
     total land...
Ethiopia:
Targeting yield/productivity increases
                       2.50
                                             ...
Ethiopia:
               Agricultural Growth Outcomes
                          Initial              Average annual GDP gr...
Ethiopia: Impacts on Prices:
                                                      “All Agriculture” Scenario
            ...
Ethiopia: Impacts on Poverty
                                 40
                                       40.0
National pove...
Ethiopia: Impacts on Poverty
                        Initial poverty                Final year poverty headcount, 2015 (%)...
Caveats
– Revised simulations will use a new version of EDRI
  SAM scheduled to be completed in early June 2009

– Sensiti...
Concluding Observations: ADLI
• The simulations indicate that agricultural growth
  does have significant poverty-reducing...
Concluding Observations: Markets
– Although agricultural growth raises rural incomes
  through production increases and gr...
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Agricultural Growth and Poverty Reduction in Ethiopia: A General Equilibrium Analysis

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International Food Policy Research Institute (IFPRI)/ Ethiopia Strategy Support Program-II (ESSP-II), CAADP roundtable, Nazareth, 26-August-2009

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Transcript of "Agricultural Growth and Poverty Reduction in Ethiopia: A General Equilibrium Analysis"

  1. 1. Agricultural Growth and Poverty Reduction in Ethiopia: A General Equilibrium Analysis Paul Dorosh James Thurlow International Food Policy Research Institute (IFPRI) (Ethiopia Strategy Support Program, ESSP-2) With the support of the EDRI/University of Sussex Social Accounting Matrix team CAADP Roundtable Nazareth, Ethiopia 26 August 2009
  2. 2. Research Questions • How much will poverty decline under the current growth path? • What is the growth and poverty impact of increasing yields and productivity for different crops and sub-sectors? • Is the 6% CAADP agricultural growth target achievable and can it halve poverty by 2015? • Which crops and agricultural sub-sectors are best at generating national growth and/or poverty reduction?
  3. 3. Methodology • Dynamic CGE model (2005-2015) • Many agricultural sectors – Based on district crop and livestock data – Calibrated to replicate observed yields and harvested land areas • Links to upstream sectors (e.g. processing) • Regionalized (based on agro-zones) • Disaggregated households – Rural farm (by land size, asset holding, etc) – Rural non-farm and urban • Micro-simulation poverty module
  4. 4. The Data Base EDRI Social Accounting Matrix 2004/05 – Constructed as part of a project with the University of Sussex (w/support of IFPRI-ESSP2) – 65 production sectors (24 agricultural, 10 agricultural processing, 20 other industry, 11 services) – Regional SAM based on the “3 Ethiopias” • Rainfall sufficient, drought prone, pastoralist • Rainfall sufficient AEZ disaggregated to humid lowlands, enset-based systems, and other (highland) rainfall sufficient areas – Poor and non-poor groups in rural and urban areas
  5. 5. Agro-ecological Zones “Three” Ethiopias
  6. 6. Baseline Scenario Assumptions • Agriculture – Land cultivated for each crop follows medium-term trends: total land cultivated increases 2.6% per year, 2009-2015 – Land growth varies across region (1.2% per year in rainfall sufficient areas, 3.2% per year in drought-prone areas, 3.7% per year in pastoralist areas) – Crop yield increases account for one-third of the crop production growth – Overall agricultural GDP growth: 4.0%/year – Note: population growth rate is 3.0 percent/year • Non-agricultural output growth based on historical medium-term trends: – Manufacturing: 6.5% per year – Services: 6.7% per year
  7. 7. Ethiopia: Targeting yield/productivity increases 2.50 Accelerated yield growth target, 2015 2.00 Expected yields under baseline scenario, 2015 Crop yield (mt/ha) 1.50 Current yields, 2005 1.00 0.50 0.00 Maize Chat Wheat Sorghum Tobacco Flowers Oilseeds Cotton Teff Coffee Barley
  8. 8. Ethiopia: Agricultural Growth Outcomes Initial Average annual GDP growth rate, 2009-2015 (%) agric. Baseline Cereals Export- Livestock All Non- GDP crops agric. agric. share (%) (1) (2) (3) (4) (5) (6) National (all zones) Agriculture 100.00 3.95 4.90 5.36 5.96 5.98 6.06 Cereals 32.98 4.96 7.38 7.41 7.63 7.68 7.82 Pulses & oils 9.37 3.31 3.53 3.94 4.10 4.12 4.03 Horticulture 6.71 4.69 4.81 4.86 4.96 4.98 5.09 Export crops 10.92 3.77 3.77 7.36 7.36 7.36 7.37 Other staples 8.00 3.02 3.19 3.13 3.22 3.24 3.11 Livestock 32.02 3.18 3.27 3.31 4.97 4.99 5.10
  9. 9. Ethiopia: Impacts on Prices: “All Agriculture” Scenario 1.050 1.025 Pulses Relative price index (baseline scenario = 100) 1.000 Tobacco 0.975 0.950 Sorghum Teff 0.925 Coffee 0.900 0.875 Maize Wheat 0.850 Cattle 0.825 Poultry 0.800 2005 06 07 08 09 10 11 12 13 14 15
  10. 10. Ethiopia: Impacts on Poverty 40 40.0 National poverty headcount (%) 35 30 25 22.7 Baseline scenario 20 All agriculture scenario 17.6 15 With non-agriculture scenario 13.3 10 2005 06 07 08 09 10 11 12 13 14 15
  11. 11. Ethiopia: Impacts on Poverty Initial poverty Final year poverty headcount, 2015 (%) headcount (%) Baseline Cereals Export- Live- All Non- crops stock agric. agric. 2005 2008 (1) (2) (3) (4) (5) (6) National 40.01 35.44 22.73 19.60 18.35 17.82 17.64 13.32 Rural regions 41.31 36.33 23.47 20.14 18.80 18.55 18.29 13.54 Humid cereals (1a) 38.19 33.07 20.16 17.67 16.48 16.82 16.57 12.19 Humid enset (1b) 44.92 40.86 30.57 26.34 23.68 23.46 23.16 18.12 Drought-prone (2) 47.97 42.51 27.21 22.67 21.97 21.03 20.73 14.61 Pastoralist (3) 27.70 22.49 10.83 9.00 8.27 6.53 6.53 4.94 Small urban centers 33.95 31.25 19.21 16.84 16.19 14.46 14.68 12.54 Large urban centers 32.95 30.81 18.89 17.05 16.10 13.86 14.03 11.76
  12. 12. Caveats – Revised simulations will use a new version of EDRI SAM scheduled to be completed in early June 2009 – Sensitivity analysis regarding key assumptions and parameters is required – Further analysis is needed regarding the costs of achieving the productivity increases simulated here – Additional analysis of regional strategies is also needed
  13. 13. Concluding Observations: ADLI • The simulations indicate that agricultural growth does have significant poverty-reducing effects. – This indicates that the overall Agriculture Development-Led Industrialization (ADLI) strategy, as well as the basic CAADP and AGP programs, are sound approaches • Complementary non-agricultural growth (in addition to agricultural growth linkages) can have a marginal impact on poverty equal in size to that of accelerated agricultural growth
  14. 14. Concluding Observations: Markets – Although agricultural growth raises rural incomes through production increases and growth linkages with the non-agricultural sector, national average real prices of some products (especially wheat, maize and milk) may fall – Moreover, if local marketing constraints are not resolved, localized market gluts could occur, seriously reducing incentives for production – Nonetheless, reduced prices of major staples helps reduce poverty of net food purchasers
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