Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 549: The Persistence of Subjective Poverty in Urban Ethiopia

Yonas Alem (), Gunnar Köhlin () and Jesper Stage ()
Additional contact information
Yonas Alem: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Gunnar Köhlin: Department of Economics, School of Business, Economics and Law, Göteborg University, Postal: P.O. Box 640, SE 40530 GÖTEBORG, Sweden
Jesper Stage: Dept of Social Sciences, Mid Sweden University, Postal: SE 851 70 SUNDSVALL, Sweden

Abstract: Using panel data spanning 15 years, this paper investigates the persistence and correlates of subjective and consumption poverty in urban Ethiopia. Despite the decline in consumption poverty in recent years, which has been linked to rapid economic growth, subjective poverty has remained largely unchanged. Dynamic probit regression results show that households with a history of past poverty continue to perceive themselves as poor even if their material consumption improves. Our results also suggest that the relative economic position of households is a strong determinant of subjective poverty, and having at least some type of employment reduces the likelihood that households will perceive themselves as poor, even if they remain in objective poverty. Receiving remittances from abroad, on the other hand, does not reduce perceived poverty, even if it raises material consumption. We argue that any analysis to measure the impact of growth on welfare should encompass subjective measures as well.

Keywords: Ethiopia; subjective poverty; dynamic probit

JEL-codes: I32; O12

22 pages, December 19, 2012

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