Once poor always poor? Exploring consumption- and asset-based poverty dynamics in Ethiopia

Abstract

This paper examines the dynamics of wellbeing in Ethiopia by assessing changes in poverty status based on consumption and asset ownership. Using panel data from the first two waves of the Ethiopia Socioeconomic Survey (ESS), we discover that although the cross-sectional poverty remains relatively unchanged (approximately 30% in both 2012 and 2014), the proportion of the population experiencing consumption poverty at some point during this period is 47%. An asset-based measure of poverty exhibits fewer transitions in and out of poverty. Examination of the direction and magnitude of change in consumption both at aggregate and subgroup levels indicates that despite a stagnant poverty rate, consumption patterns have changed significantly. The forward movers and non-poor households have increased their share of spending on nutrient-dense foods, while the chronic poor and backward movers have increased spending shares on staples (reduced on nutrient-dense foods). Our findings indicate that availability of longitudinal data at the household level provides additional insights on the dynamics of wellbeing that would be impossible to understand using cross sectional data only.

Keywords: Wellbeing dynamics, Ethiopia, LSMS-ISA, consumption-based poverty, asset-based poverty