Double digit economic growth vs. social wellbeing in Ethiopia: a cross-country comparison

Abstract

Ethiopia has been reporting double digit economic growth rates over the last decade, while at the same time being ranked as one of the impoverished nations in the world. Despite the 11.0 percent average annual real GDP growth rate since 2004, the Oxford Poverty and Human Development Initiative consistently ranks Ethiopia among the bottom three nations based on Multidimensional Poverty Index (MPI). In this paper, we investigate whether the reported economic growth has enhanced the wellbeing of the ordinary people. To address this objective, we employ three strategies. First, we divide the last two and half decades into pre- and post-2004 years, based on when Ethiopia has started registering double digit growth, to enable us conduct a pre- and postdouble digit growth analyses. Second, we select other three countries also ranked as the poorest countries based on MPI, and compare their performances vis-à-vis Ethiopia using selected social welfare and human development indicators drawn from the World Development Indicators. Third, we use Johansen cointegration and Granger causality tests to examine the impact of economic growth on these social wellbeing measures. Our results show that one, the significant jump in economic growth is not matched by most of the social wellbeing measures. Two, there is no or little significant difference, in terms of these measures, between Ethiopia and the other impoverished countries that reported much slower economic growth than Ethiopia. Three, based on Johansen cointegration and Granger causality tests, we find no significant impact of the reported economic growth on the selected social wellbeing measures. In other words, there is no evidence of economic growth enhancing social wellbeing in Ethiopia.

Keywords: real Gross Domestic Product; real GDP; real GDP per capita; economic growth; social wellbeing; Granger causality; cointegration; Ethiopia; Multidimensional Poverty Index; MPI