Does Nonfarm Economy Offer Pathways for Upward Mobility? Evidence from a Panel Data Study in Ethiopia

36 Pages Posted: 18 May 2011

See all articles by Sosina Bezu

Sosina Bezu

Chr.Michelsen Institute

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Stein T. Holden

Norwegian University of Life Sciences

Date Written: February 1, 2011

Abstract

Several empirical studies across developing countries document a positive correlation between participation in rural nonfarm employment and households’ wealth or income status. However, the direction of causality is far from obvious. This paper explores whether nonfarm employment leads to higher consumption expenditure growth in Ethiopia. We find that; 1) Households’ consumption expenditure growth is positively correlated with the initial share of nonfarm income. 2) The growth elasticity of nonfarm income share is higher for wealthier households; and 3) the source of growth for nonfarm participants lies in the higher rates of return participants enjoy on their human and physical capital.

Keywords: rural nonfarm, income dynamics, income diversification, Africa, Ethiopia, impact

Suggested Citation

Bezu, Sosina and Barrett, Christopher B. and Holden, Stein T., Does Nonfarm Economy Offer Pathways for Upward Mobility? Evidence from a Panel Data Study in Ethiopia (February 1, 2011). Available at SSRN: https://ssrn.com/abstract=1844707 or http://dx.doi.org/10.2139/ssrn.1844707

Sosina Bezu

Chr.Michelsen Institute ( email )

P.O.Box 6033 Bedriftssenteret
N-5892 Bergen, 5006
Norway

HOME PAGE: http://www.cmi.no/staff/?sosina-bezu

Christopher B. Barrett (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

Stein T. Holden

Norwegian University of Life Sciences ( email )

PO Box 5033
NO-1432 Aas
Norway
+47-64965699 (Phone)
+47-64943012 (Fax)

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