Consumption-based and Multidimensional Poverty Dynamics in Ethiopia: Evidence from Spatiotemporal Approach

Abstract

Consumption-based and multidimensional poverty comparison provides a conceptually meaningful, empirically informative and more precise image for policy decisions. This study is a deep drive of consumption-based and multidimensional poverty dynamics and the decomposition of disparities among rural and small towns in Ethiopia. Data from three rounds of the Ethiopian Living Standard Measurement Survey (LSMS) was used to compute the Foster-Greer-Thorbecke index for consumption-based poverty and the Alkire-Foster index for multidimensional poverty. The study considered a balanced sample of 3220 households every three rounds with the corresponding sample weight for the post-stratification adjustments to ensure all regions are represented. Though consumption-based poverty has been moderately declining over time, multidimensional poverty has exhibited inconsistent changes over time. The transition probability of non-poor into poor and/or change to non-poor and poor was relatively high. Multidimensional indicators exhibit backwards or forward movers of deprivations. Specifically, malnutrition and years of schooling showed a high transition probability for households to keep household status. Southern Nations Nationalities and Peoples (SNNPs), Oromia and Amhara regions have the highest relative contribution for both poverty measurements. Female-headed households had a low relative contribution for consumption-based poverty but a high contribution for multidimensional poverty. Moreover, rural areas also contribute more to consumption-based and multidimensional poverty. There is a significant difference in consumption-based poverty based on drought and shortage of rainfall shocks, but no significant change in rainfall shocks in multidimensional poverty. It implies that short-term shocks are more reflected in consumption poverty while simultaneous shocks are significant in multidimensional poverty. Considering both monetary and multidimensional measures is vital to get a complete picture of welfare decomposition and transition. Therefore, it is necessary to design policy interventions that reduce poverty in rural areas, SNNPs, Oromia and Amhara regions and male households with the highest relative contribution of poverty to improve social-economic welfare in Ethiopia.