Unemployment in Urban Ethiopia: Determinants and Impact on Household Welfare

Abstract

Data from the 2004 wave of the Ethiopian Urban Socio Economic Survey on four major cities of Ethiopia is used to investigate the determinants of unemployment in urban Ethiopia and its impact on household welfare. Regression results from a binary probit model estimation show that urban unemployment in Ethiopia in 2004 is determined by age, marital status, education beyond primary school and living in the capital Addis Ababa. Moreover, the results from OLS regression of consumption indicate that unemployment adversely affects household consumption expenditure and hence household welfare. One more unemployed household member  results in a 4.6 percent decline in per capita real consumption expenditure available to the household. Since unemployment negatively affects household welfare, efforts aiming at reducing unemployment will most likely improve welfare. Mechanisms to reduce household size such as family planning are recommended for better household welfare via their effect on household consumption.

Keywords: urban, unemployment, consumption, welfare, probit, OLS