Determinants of Pro-Poor Growth and Its Impacts on Income Share: Evidence from Ethiopian Time Series Data

Abstract

The growing research interest in the pro-poorness of growth is the main issue today. Reducing economic poverty and inequality through pro-poor growth is the aim of policies in many countries. Pro-poor growth is good for poverty eradication if it can be achieved. Ethiopia is a good example of a country where growth was pro-poor between 1990 and 2018 but the pro-poor growth was reversed in 2016. The paper examined what led to pro-poor growth between 1990 and 2018 and what may have been responsible for the reversal in 2016. Unit root test reveals that all the series are nonstationary at level and stationary at first difference and have one cointegration relation between the variables. The dynamic ordinary least squares method was used to analyze the Ethiopian time series data from World Bank Development Indicators between 1990 and 2018 for the determinant of pro-poor growth. Regression analysis shows that job creation was responsible for the pro-poor growth between 1990 and 2018. The results of the analysis showed that human capital, industrial, and services growth have negative impacts on poorest people, whereas employment and agriculture growth have positive impacts on poorest people. In the richest income group, human capital, and industrial and service growths have positive impacts while agricultural growth and employment have negative impacts.