Poverty is a multidimensional and dynamic concept. It has multiple causes that exhibit economic, social and political characteristics and hence poverty reduction policies require multidimensional approaches and strategies. Poverty reduction policies have become one of the priority policy targets of governments in developing countries and the pillar of external financial assistance from donor countries. The challenges to reduce poverty are formidable in developing countries where poverty is deep and widespread, income is extremely low, growth rate is weak and income distribution is uneven. These features of the production and distribution of output create systemic tendency for the poverty elasticity of income to be weak, making the growth induced poverty reduction less effective (Besley and Burguess, 2003; Bourguignon, 2003). In economies where the initial pattern of income distribution is highly unequal and vertical mobility is restricted by economic, social and institutional hurdles, economic growth –if it happens at all tends to have limited impact on reducing poverty. Even economies with remarkable growth rate could not achieve sustainable poverty reduction if the growth process does not generate productive job opportunities, mobility, and accumulation of assets and capital for an increasing share of the population. Growth without development becomes a possibility. The pattern, characteristics and sector composition and sustainability of growth rate are therefore as important for poverty reduction as the pace of growth performance.
The present report documents good practices and lessons learned on inclusive green growth in four key sectors of the Ethiopian economy: agriculture and land use management; forestry; energy; and transport. These sectors were selected on the basis of their contribution to promoting inclusive green growth and informing the transition to the green economy in Ethiopia. The case studies drawn from the sectors were selected based on their actual or potential contribution to the economic, social and environmental well-being of the country. Other important criteria for the selection were the studies’ implementation design, sustainability and
Poverty reduction is the core objective of the Ethiopian government. Economic growth is the principal, but not the only means to this objective. This policy approach raises fundamental questions: 1) what are the mechanisms and conditions by which economic growth translates into poverty reduction? 2) how do initial poverty and inequality affect the prospect for sustained and rapid economic growth? And, 3) what are the links among economic growth, income distribution and poverty in the short and long term? This paper is aimed at addressing these questions.
The Government of Ethiopia has expressed its determination to achieve structural transformation, as reflected in its Growth and Transformation Plan, which was adopted in 2010 and has been the key medium-term development plan for the period 2010/11-2014/15.1 Although rapid growth is necessary to reduce poverty, growth will be unsustainable in the long run unless it is both socially inclusive and environmentally sound. Accordingly, Ethiopia has embarked on a national strategy of building a climate-resilient green economy.2 Transitioning to an inclusive green economy is receiving growing attention as a pathway that can lead to sustainable development. It entails a low-carbon, climate-resilient, resource efficient, environmentally sustainable and socially inclusive growth path, thus promoting the achievement of internationally agreed development goals, including the Millennium Development Goals and the sustainable development goals, which are expected to be adopted as part of the post-2015 development agenda in September 2015.
Ghana is known for its stability, good governance and relatively well-developed institutional capacities that support the gradual achievement of human rights. Having experienced steadily increasing economic growth of over 7% per year on average since 2005, Ghana attained lower-middle income country status in 2010. Income from offshore oil reserves discovered in 2007 began to flow in 2011, creating double-digit growth for the year. Accompanying income growth has been a rapid reduction in monetary poverty from 51.7% in 1992 to 24.2% of the population by 2013, meaning that Ghana has achieved the MDG 1 target.
Beyond its core focus on macroeconomic and financial policies, the Fund is increasingly concerned with how income inequality affects growth and macroeconomic stability. Over the last decade, many of the countries that have entered a path of fast economic development and reduced poverty simultaneously experienced a rising gap between the rich and poor. As a result, in many of them, including those in sub-Saharan Africa (SSA), income inequality has increased. The relationship between growth and inequality is a complex one, given that the causality may go in both directions, and the effect of inequality on growth may change with a country’s stage of development. A growing body of research indicates the adverse implications of inequality for development and macro stability, arguing that it may lead to political and economic instability, weaken support for economic reforms, and undermine progress in education and health (Persson and Tabellini, 1994; Easterly, 2007; Berg, Ostry and Zettelmeyer, 2012; Ostry et al., 2014). Recent empirical work conducted at the Fund confirms this relationship between rising income inequality and its impact on economic growth (Dabla Norris et al., 2015).
Ethiopia—one of the fastest-growing economies in Africa—double digit GDP growth rate for more than a decade; Initially led by agriculture, growth has become more broad-based, with manufacturing, services generating an increase share of output; Accelerated industrialization being laid by increased educational attainment, improved health outcomes, and quantum increases in infrastructure capacity; Industrial parks are starting to spring up across the country, echoing China’s development experience 20 years ago.
Ethiopian society, economy and environment are so intimately interlinked that systematic attention is essential if clashes are to be resolved and synergies realized. For example, the majority of poor people are principally dependent on agriculture but, in turn, society is dependent on farmers managing land well to sustain water supplies, biodiversity and other environmental services. Such relationships are dynamic and increasingly intense: climate change, rising population, resource scarcities and price volatilities put them all under pressure. An integrated perspective that works operationally is needed – one that makes economic, social and environmental sense and that inspires stakeholders. The holistic approach that the Ethiopian Government has recently developed aims to tackle the problems inherent in growth paths that produce environmental problems, and to realize potentials from investing in Ethiopia’s natural assets. For example, the country’s agricultural products and potential for green hydroelectric power are unique attributes that could drive development in ways that are environmentally sound and provide new jobs and satisfying livelihoods.
This research project addresses three intersecting issues where it has been acknowledged that there is too little empirical knowledge: the transmission mechanisms linking global trade in agricultural products with poverty reduction; the functioning and significance of rural labour markets in low-income countries; and the labour market dimensions of Fairtrade certification. The Fairtrade, Employment and Poverty Reduction in Ethiopia and Uganda (FTEPR) research team, based at SOAS, University of London, set out to develop and apply innovative, careful research methods in order to gather analytically useful, policy relevant evidence on these issues.
Economic inequality has worsened significantly in Malawi in recent years. In 2004, the richest 10 percent of Malawians consumed 22 times more than the poorest 10 percent. By 2011 this had risen to see the richest 10 percent spending 34 times more than the poorest. Yet even this shocking statistic is likely to be a significant underestimate1. Anyone who has seen the many large mansions springing up on the edges of Lilongwe and Blantyre, and the plethora of new shopping malls being opened, knows that conspicuous consumption amongst the richest is dramatically growing. Malawi’s Gini coefficient, the key measure of inequality, also shows the extent to which robust economic growth is benefiting the rich whilst leaving the poor behind. In seven years of impressive growth, the Gini has leapt up from 0.39, on a par with Cameroon, to 0.45, on a par with the Democratic Republic of Congo.