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Magnitude and Determinants of Rural Poverty in Zeghe Peninsula, Ethiopia

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DOI: 10.1080/10875549.2010.494953

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Magnitude and Determinants of Rural Poverty in Zeghe Peninsula,

Ethiopia
Maru Shetea
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Norwegian University of Life Science, Ås, Norway

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 Journal of Poverty, 14:308–328, 2010
Copyright © Taylor & Francis Group, LLC
ISSN: 1087-5549 print/1540-7608 online
DOI: 10.1080/10875549.2010.494953

Magnitude and Determinants of Rural Poverty

in Zeghe Peninsula, Ethiopia

MARU SHETE
Norwegian University of Life Science, Ås, Norway

The article examines the magnitude and determinants of rural

poverty at Zeghe Peninsula. It is done based on the dimension
of poverty expressed in terms of consumption expenditure. Data
were collected through questionnaire survey from 200 sample
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households. The Foster-Greer-Thorbeck (FGT) measure of inten-

sity of poverty and the logit model were used. FGT is composed of
additively decomposable poverty indices of incidence, depth and
severity. Based on the FGT result, 68.5% are poor, and 18.7% con-
stitutes the poorest of the poor in the Peninsula (i.e., severity). The
percentage shortfall of consumption expenditure of the poor from
the poverty line (i.e., depth) is 32.8%. From the logit model, vari-
ables like large land holding size, better suitability of land for coffee
production, participation of households in contractual farming
activities, engagement of households in petty trading, beekeeping
and fishing activities decreased the probability of households to be
poor. High dependency ratio and participation of households in
firewood-selling activities increased the chance of households to
fall into poverty. This implies that any development endeavor that
aims at improving the welfare of people of the Peninsula should
focus on these correlates of poverty.

KEYWORDS rural poverty, poverty line, magnitude, determi-

nants and Zeghe Peninsula

INTRODUCTION

Ethiopia has a total population of about 85 millions with 3.2% annual growth
rate in 2009. Agriculture has always been the backbone of the economy

Address correspondence to Maru Shete, P.O. Box 50321, Addis Ababa, Ethiopia. E-mail:
marushet@yahoo.com

308
 Rural Poverty in Ethiopia 309

contributing 45% of the GDP (Central Intelligence Agency [CIA], 2010). The
country with a per capita income of $280 (World Bank, 2009) is known to
be one of the world’s poorest nations with 38.7% of the population living
below poverty line in 2005 (CIA, 2010).
Most poverty studies conducted in Ethiopia so far used the Ethiopian
Household Survey data collected on some selected places (see Bigsten,
Bereket, Abebe, & Mekonnen, 2003; Dercon, 2000; Dercon & Krishnan,
1998). Hence, it lacked a closer look to reveal large pockets of poverty
in other neglected rural areas like Zeghe peninsula. A single study by
Tjoflaat (2002) done through participant observation in two villages of
Zeghe Peninsula (Attati and Gami villages) discussed the determinants of
poverty in these villages. Nevertheless, outcomes cannot be generalized
for the remaining 13 villages because she did not follow standard sam-
pling procedures. Besides, the subjective poverty analysis procedure that
the researcher employed has been criticized to be unofficial but complimen-
tary to other poverty analysis procedures (Rio Group, 2006). It also failed
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to include important explanatory variables that are expected to reflect the

unique farming nature of the peninsula. This article was done with the objec-
tives of determining the magnitude of poverty in Zeghe Peninsula in terms
of incidence, depth, and severity and analyzes the determinants of people’s
well-being. The article attempts to bring better research information about
the subject through employing a standard poverty analysis procedure.
The remainder of the article is structured into literature, method,
results and discussion, and conclusion. The literature section elaborates cur-
rent debates on the conceptualization, measurement, and determinants of
poverty. The next section discusses the methodological procedures. The
results and discussion section presents and discusses the major findings of
the study and relates those findings to previous studies. Finally, it concludes
and gives future research area.

LITERATURE ON POVERTY

There are basically three groups of literature in the study of poverty: concep-
tualization, measurement, and determinant. “Understanding Poverty” deals
with the major theoretical underpinnings with regards to the question: What
is poverty? “Measuring Poverty” reviews the mechanisms of identifying the
poor and measuring the magnitude of poverty. “Determinants of Poverty”
reviews the literature to answer the question: Why poor?

Understanding Poverty
Poverty is a generic subject that makes it difficult to give a single definition.
As a result, there are different approaches in its conceptualization. Some
 310 M. Shete

conceptualize it as “chronic” and “transitory.” Chronic poverty is defined as

lack of assets (land, livestock, etc.) and/or capability (health, finance, and
education), which is structural and persistent from year to year. Transient
poverty, on other hand, is a temporary situation that happens due to some
natural or human-made shocks like drought, war, flood, and so on (Brown &
Teshome, 2007; Duclos, Araar, & Giles, 2010; Jalan & Ravallion, 1998; Ribas &
Machado, 2007).
Another group contends poverty as “absolute” and “relative.” In abso-
lute poverty, people are considered poor when some absolute needs are not
sufficiently satisfied. In relative poverty or relative deprivation, a person is
said to be poor if she or he has less than what others have (Bourassa, 2009;
Hales, 2007; Nolan & Whelan, 1996; Øyen, Miller, & Samad, 1996; Ravallion,
2003; Unwin, 2007; World Bank, 1996). A third group conceptualizes poverty
based on individuals’ own declaration of their well-being status in a society,
which is called subjective poverty definition. Unlike the other approaches,
subjective poverty definition depends directly on the opinion and feeling of
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individuals to determine the minimum level of income or consumption that

is acceptable in the society (Krishna, 2007; Nolan & Whelan, 1996).
In the conceptualization of poverty, the choice of income or con-
sumption expenditure as best indicator for living standard measurement
of households is another point of debate. Most analysts prefer to use cur-
rent consumption as an indicator of living standard measurement because
income of the poor often varies over time. Particularly, this is true for
underdeveloped economies that depend on traditional production systems.
On the other hand, consumption expenditure may reflect the purchas-
ing power of households better than measured current income because
recorded income during a survey may be distorted by transitory poverty sit-
uation. However, consumption shows relative stability due to a consumption
smoothening effort from own saving, borrowing from others, or social risk-
sharing schemes. Farmers in developing countries also have the difficulty of
excluding farm input costs from their revenue in estimating their income,
and inaccuracy is tenable. Sometimes it is also common to have underesti-
mated income figures as people are reluctant to give accurate information
about their incomes (Atkinson, 1991; Chaudhuri & Ravallion, 1994; Deaton
& Grosh, 2000; Deaton & Zaidi, 2002; Fields, 2001; Kyereme & Thorbecke,
1991). Consumption as indicator of well-being is not also without prob-
lem. Households might have difficulty of recalling certain expenditures. In
developing countries where farmers are subsistent, they are producers and
consumers of their own products and might have difficulty considering con-
sumption from own products as part of their expenditures. There are also
some big purchases that households use for longer periods than the survey
period, which overinflates their consumption expenditure. In a nutshell, the
choice of income or consumption as indicator of well-being is dependent on
the particular characteristics of the country where the poverty measurement
is performed (Rio Group, 2006).
 Rural Poverty in Ethiopia 311

Measuring Poverty
To identify “who is the poor” and “how poor is that person,” it is intuitive
to have some kind of cut-off point, which is called poverty threshold/line.
Poverty line is a per capita income/consumption or a cut of living standard
level below which an individual is considered to be poor (Doyle, 2003;
Ministry of Finance and Economic Development [MoFED], 2002b; Ravallion,
1992). Depending on the conceptualization of poverty, one can have an
absolute poverty line, relative poverty line, or subjective poverty line (Rio
Group, 2006).
Absolute poverty line is defined as a threshold level of income for buying
essential items to meet certain absolute basic needs. Alternatively, it is a con-
sumption level that allows one to fulfill minimum energy requirement and
some nonfood needs. This entails the researcher to define the type, quan-
tities, and price of food and nonfood items that are included in the basket
of absolute threshold (Ravallion, 1994; Ravallion & Bidani, 1994; Ravallion &
Sen, 1996; Rio Group, 2006).
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The normative or the food energy intake (FEI) and the positivist or
the cost of basic needs (CBN) approaches are used to determine the mini-
mum energy requirement to be included in the basket of basic food items.
In the normative approach, the basket of food items is defined based on
the caloric requirements for the population as stipulated by international
organizations (Food and Agriculture Organization [FAO/WHO/UNU], 1985,
2004; Greer & Thorbecke, 1986). In the positivist approach, the basket of
food items is defined to reflect certain food habits, tastes, and preferences
of a given society while meeting a certain daily caloric requirement to lead
a healthy life (Rio Group, 2006). The positivist approach was found to be
more robust than the normative approach in a study conducted in Ethiopia
(Woldemariam, 1997). Here one can think of food poverty line, which is a
threshold per capita income or consumption level that ensures the fulfilment
of the minimum energy requirement for a healthy daily life.
To come up with the total poverty line (hereafter absolute poverty line),
one needs to make allowance for the nonfood component of the basic needs
of the poor. The market basket measure in Canada (Rio Group, 2006),
the normative basket of essential satisfactors in Mexico (Boltvinik, 1984;
Boltvinik & Marin, 2003) and the experience in Indonesia (Maksum, 2004)
are efforts to construct normative nonfood baskets. Nevertheless, such bas-
kets are uncommon and subjected to critiques. Others (like Getaneh, 1997)
followed the work of Mollie Orshansky who estimated the cost of the non-
food basket in the United States based on the 1955 consumption pattern of
the population (for “Orshansky’s multiplier,” see Orshansky, 1963, 1965).
The methodology is criticized by Fisher (1992) as “normative” and not
“empirical.” Alternatively, following the work of Ravallion and Bidani (1994),
different poverty studies estimated the Engle’s demand function to determine
 312 M. Shete

the nonfood share of the absolute poverty line (Dercon & Krishnan, 1996;
Gebremedhin & Whelan, 2007; Park & Wang, 2001).
Relative poverty line, which is based on the conceptualization of
poverty as relative deprivation, is set at one half, one third, or two thirds
of the mean or median income or percentile of the income distribution. This
involves classification of the population into different quartiles depending
on the proportion chosen by the researcher. Finally, the researcher decides
that the population in either the last one or two quartiles to be consid-
ered as poor (Citro & Michael, 1995; Rio Group, 2006; Townsend, 1979).
Such poverty definition reflects income inequality than absolute deprivation.
Hence, it is widely used in developed nations where the interest is to nar-
row down the gap in prosperity (Ravallion, 1994; Rio Group, 2006; Sen,
1983). Nevertheless, Fafchamps and Shilpi (2008) used the approach in a
developing nation like Nepal.
Subjective poverty line is the last type of poverty threshold constructed
on the basis of individual’s own perception of well-being in the society.
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Researchers (Danziger, van der Gaar, Taussig, & Smolensky, 1984; Garner &
Short, 2003; Van Campenhout, 2006) constructed the subjective poverty line
based on questions like “what do you consider to be an absolute minimum
income for your family?” The response to the question represents the value
for the subjective poverty line for the respondent. Such type of poverty
threshold is often used as complimentary to other poverty thresholds, and
not commonly used in poverty studies (Rio Group, 2006).
After constructing poverty line, it is now easy to answer the ques-
tion: “who is poor?” Those people whose income/consumption expenditure
below the poverty line are said to be poor. The magnitude of poverty is
then calculated with the help of indices. There are three classes of poverty
indices that are used to measure the magnitude of poverty: poverty head
count index (HCI), poverty gap index, and squared poverty gap index.
The HCI is simply the ratio of the number of poor people to the total
population in a community. Although still widely used, it is an unsatisfactory
measurement for two important reasons. First, it says nothing about how far
the income/consumption expenditure of the average poor person is from
the poverty line, that is, the poverty gap. Second, poverty measures should
decrease if the chronically poor individual receives income or consumer
commodities from the moderately poor individual. However, the measure
does not reflect such transfers. The poverty gap index measures the depth
of poverty. It reveals the transfer needed to bring the poor to a minimum
level of consumption. The squared poverty gap index measures the severity
of poverty (see Sen, 1976, for details).
Foster, Greer, and Thorbecke (1984) suggested additively decompos-
able poverty indices (P α , where α equals to 0, 1, and 2). At P 0 , all poor
people are given equal weight, and the measure is equivalent with the HCI.
At P 1 , each poor person is weighted by his or her distance to the poverty
 Rural Poverty in Ethiopia 313

line, (Z− Xi ), relative to Z. Thus, P 1 (equivalent to poverty gap index) mea-

sures the distance to the poverty line for the average poor person. At P 2
(equivalent to the squared poverty gap index), the weight given to each
poor person is more than proportional to the shortfall from the poverty
line. Thus, an increase in income for the poorest of the poor is judged so
important by the policy maker that poverty is said to decline even if such
an increase comes at the cost of a decrease in income/consumption for the
moderately poor.

Determinants of Poverty
In the literature of poverty studies, various groups of variables are mentioned
to explain why an individual falls below a poverty line. The explanatory
variables vary depending on the unit of analysis. If the unit of analysis is
macrolevel, the variables will be those with wide geographical impact (e.g.,
war, inappropriate economic policy, drought, famine, disease epidemic,
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etc.). With microlevel (household) analysis, the reasons will be different,

which is the focus of this review.
There are at least three set of variables discussed in the literature as
determinants of poverty at household level: household characteristics (like
age, sex of household head, family size, dependency burden, education,
etc.), production and income-generating activities (land size, livestock own-
ership, participation in off-farm and nonfarm activities, etc.), and location.
As presented in Table 1, the various studies indicated that households
with large family size and high dependency burden are generally poor.
In addition those households headed by women and older individuals
tend to be poor. Ownership of physical capital (land, livestock, and oxen)
and human capital (education) generally contribute to better well-being of
households.

TABLE 1 Summary of Well-Being Explanatory Variables from Previous Studies

Study Method Influence on

Explanatory variables location used wellbeing Source

High family size and Ethiopia Probit Negative Bigsten et al. (1999b; 2003)
high dependency Logit Negative Bigsten and Shimelis (2003)
burden OLS Negative Mulat et al. (2003)
Kenya Probit Negative Oyugi (2000)
Kenya Logit Negative Alemayehu et al. (2001)
Female headed Ethiopia Probit Negative Bigsten et al. (1999b; 2003)
households
Education Ethiopia Probit Positive Bigsten et al. (1999b)
Ethiopia A Positive Tjoflaat (2002)
Kenya Probit Positive Alemayehu et al. (2001)
Old age of head Ethiopia Logit Negative Bigsten and Shimelis (2003)

(Continued)
 314 M. Shete

TABLE 1 (Continued)

Study Method Influence on

Explanatory variables location used wellbeing Source
Oxen and livestock Ethiopia Probit Positive Getaneh (1997)
ownership Ethiopia OLS Positive Mulat et al. (2003)
Land land size Ethiopia Logit Positive Chuol (2001)
Ethiopia Probit Positive Getaneh (1999)
Mozambique OLS Positive Bruk (2001)
Off-farm employment Ethiopia Probit Negative Bigsten et al. (1999b)
Logit Negative Bigsten and Shimelis (2003)
Probit Positive Getaneh (1999)
Fishing Ethiopia Logit Positive Chuol (2001)
Chicken ownership Ethiopia A Positive Tjoflaat (2002)
Remittance Ethiopia A Positive Tjoflaat (2002)
Note. OLS = Ordinary Least Square; A = the method of participant observation and narrative analysis;
Female headed households = households that are lead by women; Head = the bread winner of the
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household that makes major household decisions.

This article generally addresses the magnitude of poverty and its

determinant factors in Zeghe Peninsula. Most previous studies used a
single national household survey data that ignored large pockets of poverty
in rural areas like Zeghe. A single study done at Zeghe Peninsula by
Tjoflaat (2002) lacked the methodological rigor. This article fills this gap by
following standard poverty analysis procedures, which are presented in the
forthcoming sections.

METHOD
Sampling Procedure and Data Source
Zeghe Peninsula is one of the rural areas of the Amhara regional state, which
is found in northwestern Ethiopia. It is located 32 km away from the regional
state’s capital Bahir Dar (Bureau of Planning and Economic Development
[BoPED], 2001). The peninsula, which is estimated to host a total of 1,673
household population, is composed of 15 villages. The villages are adminis-
tered under Ura and Mehal Zeghe Yiganda peasant associations (Cooperative
for Assistance and Relief Everywhere [CARE] Zeghe, 2001). Households in
the peninsula depend for their livelihood on cultivation of forest coffee, fuel
wood selling, and fishing. Unlike other rural areas in Ethiopia, there are no
oxen ploughing and livestock farming with the exception of chicken rearing.
Finger millet and maize are the staple food items consumed by the residents
of the peninsula, and with some fish consumption.
The data were collected using primary and secondary means. Interviews
of a total of 200 households with a structured questionnaire were held in
 Rural Poverty in Ethiopia 315

2004. Discussions with key informants were held. Based on welfare indica-
tors of consumption and income, the 15 villages found in Zeghe Peninsula
are relatively homogenous that enables a random sample of some villages for
the survey. However, given the time and other resources that the researcher
had, it was possible to reach all of the 15 villages for the survey. Because
each village constitutes a varying number of households, the number of
households (of a total of 200 samples) to be taken from each village was
done proportional to the size of the village. Hence, I used proportional
sampling technique to decide how many households to include from each
village. A taxpayers list from the local administrative office, which was afresh
by key informants, was used as a sampling frame. Again, because there was
relative homogeneity among households, sampling of households was done
through systematic random sampling technique.

Method for Constructing the Poverty Line and Measuring Poverty

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In the current study, consumption expenditure, instead of income, is used as

indicator of well-being. From the three types of poverty lines, the absolute
poverty line approach is followed for the current study. Basket of food
items that gives 2200 Kilo Calorie (Kcal) per adult per day constructed
for a cereal-based farming rural area of Ethiopia is adapted for Zeghe
Peninsula (Table 2). Because finger millet is a major staple food for peo-
ple of Zeghe Peninsula, in place of sorghum, millet is substituted. According
to Agren and Gibson (1968), the calorie content of finger millet (325–346
Calorie/100gm) is comparably similar to the calorie content of sorghum
(325–360 Calorie/100gm).
In addition to control consumption differences created by age and sex
differences of household members, adult equivalent conversion (AEC) fac-
tors developed by Dercon and Krishnan (1998) are used. Then, the basket
of food items is valued at local prices collected concurrently with the house-
hold survey. The monetary value of the food basket gives the food poverty
line (the cost of food for an adult per day for a healthy life). To come
up with the absolute poverty line, a nonfood share has to be added to
the food poverty line. Following the work of Ravallion and Bidani (1994),
the nonfood expenditure of people whose total expenditure is equal to the
food poverty line is determined through estimation of an Engel’s demand
function. In the function, the dependent variable is the share of total con-
sumption expenditure devoted to food (Sij ) by each household (i) in each
village (j). The righthand side represents the logarithm of total consumption
expenditure per capita (Yij ) normalized by the food poverty line (Zf ), and
its squared value as the consumption variables. To get a better model fit,
household characteristics and location variables are included in the model.
The total poverty line (Zt ) is then calculated as Zt = Zf (2-aj ), where aj
 316 M. Shete

TABLE 2 Food Basket that Gives 2200 Kilo Calorie (Kcal) per Adult per Day
for Cereal-Based Farming Rural Areas of Ethiopia

No. Food Item Quantity

A Cereals (in Kg)

A.1 Teff 1.63
A.2 Barley 4.24
A.3 Maize 3.82
A.4 Millet 4.53
B Pulses (in Kg)
B.1 Lentils 0.35
B.2 Horse beans 1.84
B.3 Cow peas/Grass pea 0.35
B.4 Chick peas 0.71
B.5 Shiro 0.92
C Vegetables (in Kg)
C.1 Cabbage 0.21
C.2 Onion 0.35
D Root Crops (in Kg)
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D.1 Potato 0.14

E Other Food Items
E.1 Milk (lt) 0.49
E.2 Coffee (Kg) 0.57
E.3 Sugar (Kg) 0.14
E.4 Salt (Kg) 1.20
E.5 Cooking Oil (lt) 0.28
E.6 Berbere (Kg) 0.85
E.7 Bread (Kg) 0.14
Note. Shiro is a sauce made from mashed pules. Berbere is a smashed red pepper mixed
with spices.
Source: Adapted from Dercon & Mekonnen (1999).

denotes the share total consumption expenditure devoted to nonfood com-

modities. For details of the procedures followed in the current study, see the
approach of constructing absolute poverty line as suggested by Dercon and
Krishnan (1996).
After constructing the absolute poverty line, level of poverty in the area
must be measured. In this study, the Foster-Greer-Thorbeck (FGT) method
is used to measure the magnitude of poverty in Zeghe Peninsula. According
to Foster et al. (1984), the method is specified as

q  α
1  z − xi
Pα = (1)
n i=1 z

Where, α equals to 0, 1 and 2 for P0 (HCI), P1 (poverty gap index), and

P2 (squared poverty gap index), respectively. Xi is consumption expenditure
per adult equivalent for individual i; Zt is the total poverty line; q is the
 Rural Poverty in Ethiopia 317

number of people whose consumption expenditure is below the poverty

line, and n is the total number of individuals in the community.

Method for Identifying the Determinants of Poverty:

The Logit Model
To identify the determinants of poverty in the peninsula, the logit model
is estimated. In the logit model, the probability of an event occurring is
directly estimated (Norusis, 1994). The parameters in the logit model are
estimated through the maximum likelihood method. That is, the coefficients
that make the observed results “likely” are selected. Because the objective of
the article is to identify the determinants of poverty, the dependent variable
should represent the overall poverty situation of households measured with
the help of total poverty line (not food poverty line). In the righthand side
of the equation, a set of different explanatory variables hypothesized based
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on previous studies of well-being are included (see Table 3).

RESULTS AND DISCUSSION

Magnitude of Rural Poverty in Zeghe Peninsula
The mean consumption expenditure for Zeghe Peninsula is found to be
B$596.50 birr1 per adult per year. The figure is far below the national mean
per capita consumption expenditure calculated for rural areas, which is
B$995 per year (MoFED, 2002b). The food poverty line for the peninsula is
found to be B$653.68 per adult per year. It is higher than the national food
poverty line of B$647.8 per adult per year determined by MoFED (2002a)
based on valuing a similar basket of food items that provide 2200KCal
per adult per day. It is also higher than the food poverty lines calculated
by Getaneh (1997) for Dinki (B$386.52), Yetmen (B$456), and Shumsha
(B$502.2). Zeghe Peninsula is a market dependent economy where most of
the food and all of the nonfood commodities are purchased from nearby
towns. Due to high transaction costs, living expenses are very high. This is
reflected in the higher poverty line figures compared to other studies.
Table 4 presents estimation result of Engle’s demand function. The
model is significant at p < 0.05 (F value of 2.312). The food share for Zeghe
Peninsula was 0.84. It means that people of the peninsula devote 84% of
their total consumption expenditure to food items and only 16% of their
total expenditure is dedicated to nonfood commodities like clothing, shelter,
education, health care services, and so on. A lower value for the nonfood
items is a proxy for the overall poverty situation of the area. Adding the
nonfood share to the food poverty line gives total poverty line. Accordingly,
the total poverty line for area is B$758.27 per adult per year.
 318 M. Shete

TABLE 3 Variables and their Expected Signs

S.N. Variable Description Measurement Expected sign

1. FODSTAT Household’s food Dummy (1 if food secure, Response variable

security status 0 otherwise)
2. AHHH Age of head Years Positive
3. SHHH Sex of head Dummy (1 if male, Positive
0 otherwise)
4. DEPRATIO Dependency ratio Proportion of dependent Negative
families to active ones
5. SUITABLE Suitability of farm Dummy (1 if suitable, Positive
for coffee 0 otherwise)
production
6. TOURSITE Tourist attraction Dummy (1 if household Positive
located in tourist attraction
site, 0 otherwise)
7. PRIMEDH Primary education Dummy (1 if the head Positive
of head of completes primary
household education, 0 otherwise)
8. PRIMEDHW Primary education Dummy (1 if the head’s wife Positive
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of head’s wife completes primary

education, 0 otherwise)
9. LANDHOL Farm size owned Hectare Positive
10. PETTYTRA Petty trading Dummy (1 if participates, Positive
0 otherwise)
11. PARCONTR Contract farming Dummy (1 if participate, Positive
0 otherwise)
12. NOBEEHIV Bee hive Number of beehives Positive
13. SAVCLTUR Saving culture Dummy (1 if household saves, Positive
0 otherwise)
14. FUELWOOD Fire wood Dummy (1 if household sells Negative
firewood, 0 otherwise)
15. FISHING Fishing Dummy (1 if household fish, Positive
0 otherwise)
16. CHICKEN Chicken Number of chicken Positive

The FGT result for the magnitude of poverty in Zeghe Peninsula

indicated that 68.5% (P0 or HCI) of the households are poor and 18.7%
(P2 or severity of poverty) of the households constituted the poorest of
the poor section of the peninsula. Based on the poverty gap index (P1 ),
the average consumption shortfall needed to bring the entire population
up to the total poverty line is 32.8%. The magnitude of poverty in Zeghe
Peninsula are far above the national averages, which were 38.7% in 2005
(CIA, 2010); 45% in 1999–2000 (MoFED, 2002a); 48% in 1995–1996 (Ministry
of Economic Development and Co-operation [MEDaC], 1999); 45% in 1995–
1996 (Dercon & Krishnan, 1998); 39% in 1994 (Dercon, 2000). Because of
such huge magnitude of poverty, households often lead a difficult life and
employ precarious coping strategies like migration. From the key infor-
mant’s interview, it was revealed that out of 1,673 household population,
153 households (9%) are totally displaced from their homes to nearby
 Rural Poverty in Ethiopia 319

TABLE 4 Estimation Result of Engel’s Demand Function (Dependent Variable: Food Share)

Standard Significance
Variables Coefficient Error t Value level

Constant 0.8400 0.043 19.410 0.000∗∗∗

Log real consumption per adult equivalent −0.0768 0.043 −3.989 0.000∗∗∗
divided by food poverty line
Log real consumption per adults equivalent −0.0449 0.020 −2.242 0.026∗
divided by food poverty line squared
Age of household head 0.0080 0.020 0.392 0.695
Male adults 15 years old and above −0.0057 0.010 −0.598 0.550
Male children between 5 and 15 0.0299 0.019 1.610 0.109
Male children between 0 and 5 −0.0086 0.007 −1.158 0.248
Female adults 15 years old and above −0.0042 0.008 −0.495 0.621
Female children between 5 and 15 −0.0449 0.020 −2.242 0.026∗
Female children between 0 and 5 −0.0768 0.043 −3.989 0.000∗∗∗
Adjusted R 2 = 0.056, F value for the model = 2.312∗∗ .
∗∗∗
Significant at p < 0.01.
∗∗
Significant at p < 0.05.
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∗
Significant at p < 0.1.

cities and towns. In addition, heads of 34 households (2%) temporarily

migrated to other locations in search of daily labor, leaving their families
at home.

Determinants of Rural Poverty in Zeghe Peninsula

The model predicted 94.5% of the nonpoor, 97.5% the poor, and 96.6% of
overall households, indicating better model fit. Estimation result indicated
that the coefficients for dependency ratio, suitability of coffee land owned,
landholding size, participation of households in contractual farming activi-
ties, petty trading, fishing, firewood selling, and number of beehives owned
are significantly different from zero. I have accepted an alpha level as high
as 0.1 for the variables: participation in contractual farming, dependency
ratio, and participation in firewood selling. These variables were mentioned
by key informants to be important determinants of well-being in the penin-
sula. Hence, the chance of making Type I error is lower. Estimation results
are presented in Table 5, and all references for the discussion below should
be made to the same table.
Demographic situation of Zeghe Peninsula is worth mentioning. About,
66% of households have greater than five family members. Average fam-
ily size (5.84 persons) is higher than the regional average (4.5 persons)
and the national average (4.9 persons) (MoFED, 2002a). The practice of
using family-planning techniques is reported to be extremely low (CARE
Zeghe, 2001). Economists argue that having many children is a reflection
of imperfect labor and insurance markets. Households try to have as many
children as possible for reason of getting adequate labor for farming, and
 320 M. Shete

TABLE 5 Estimation Result of Logit Model

S.N. Variables Coefficient Standard error Wald P value Odds ratio Marginal effect

1. TOURSITE −2.786 1.824 2.333 0.127 16.211 —

2. SUITABLE −3.533 1.650 4.586 0.032∗∗ 0.029 0.028
3. SHHH −1.328 3.014 0.194 0.660 3.772 —
4. AHHH −0.048 0.050 0.933 0.334 0.953 —
5. LANDHOL −4.708 2.238 4.426 0.035∗∗ 110.840 0.990
6. PARCONTR −2.451 1.396 3.082 0.079∗ 0.086 0.079
7. PETTYTRA −3.370 1.430 5.554 0.018∗∗ 0.034 0.033
8. NOBEEHIV −0.300 0.146 4.225 0.040∗∗ 0.741 0.430
9. FUELWOOD 2.421 1.449 2.791 0.095∗ 11.254 0.920
10. FISHING −4.576 1.354 11.432 0.001∗∗∗ 0.821 0.450
11. PRIMEDH −1.872 1.500 1.556 0.212 0.154 —
12. PRIMEDHW −0.803 1.305 0.379 0.538 0.448 —
13. CHICKEN 0.206 0.326 0.398 0.528 1.228 —
14. DEPRATIO 1.850 1.029 3.231 0.072∗ 6.358 0.860
15. SAVCLTUR −0.936 1.034 0.818 0.366 0.392 —
16. Constant 3.157 4.079 0.599 0.439 23.491 —
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Model Summary
2-Log Likelihood = −37.35 Cox and Snell R2 = 0.643 Nagelkerke R 2 = 0.9 n = 200
Note. TOURSITE = tourist attraction site; SUITABLE = suitability of land owned; SHHH = sex of house-
hold head; AHHH = age of household head; LANDHOL = landholding size; PARCONTR = participation
in contract farming; PETTYTRA = participation in petty trading; NOBEEHIV = number of beehives
owned; FUELWOOD = participation in firewood selling; FISHING = participation in fishing; PRIMEDH
= primary education of head; CHICKEN = number of chicken owned; DEPRATIO = dependency ratio;
SAVCLTUR = saving culture.
The odds ratio of an event happening is the probability that the event will happen divided by the
probability that the event will not occur.
∗
Significant at p < 0.1.
∗∗
Significant at p < 0.05.
∗∗∗
Significant at p < 0.01.

for social security reasons at old age. Along with high family size, there
is high dependency burden in the peninsula. Average dependency ratio
for Zeghe Peninsula is 1.14 with a maximum value as high as 6.0. High
dependency ratio affects household’s saving that limits the chance of con-
sumption smoothening during a bad production season. The coefficient for
dependency ratio of households is significantly different from zero at p < 0.1.
As dependency ratio increases by one unit, citrus paribus, the probability
that a household falls into poverty increases by 86%. The result is consistent
with previous findings (see Bigsten, Bereket, Abebe, & Mekonnen, 1999,
2003; Getaneh, 1997; MoFED, 2002a, b).
The mean landholding size in Zeghe Peninsula is about 3.67 hectares.
52% of the proportion of income of households in the peninsula is earned
from activities associated with land. Economic theories identify natural cap-
ital (e.g., land) as an important determinant of welfare and economic
development (Lundgren, 2005). Previous studies also confirmed the posi-
tive role of landholding size on household’s well-being (see Bruk, 2001;
 Rural Poverty in Ethiopia 321

Chuol, 2001; Getaneh, 1997; Tjoflaat, 2002). In this article, the coefficient
for landholding variable is significant at p < 0.5 level. As landholding size
of the household increases by one hectare, the probability of the house-
hold falling into poverty decreases by 99%. Nevertheless, others (Bigsten
et al., 1999, 2003; MoFED, 2002a) explained the existence of no relationship
between landholding size and household’s poverty situation. It is also intu-
itive that quality of land owned is positively correlated to productivity. In
Zeghe Peninsula villages like Washa, Attati, Brorami, Mekelami, and Gami
are known to be located at the bottom of the Ararat Mountain and sur-
rounding high slope gradient areas with the possibility of receiving eroded
nutrient-rich materials from uplands areas. This has increased the potential
of these areas for better water retention capacity, less erosion, and better
soil fertility. About 31% of the surveyed households own coffee lands that
are relatively suitable for coffee production. The suitability of coffee lands
owned has increased the opportunity of getting good coffee production that
decreases the chance of falling into poverty. Ownership of coffee lands that
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are more suitable for coffee production decreases the probability of house-
holds falling into poverty at p < 0.05 level. As the value for land suitability
shifts from zero to one, the probability of households to fall into poverty
decreased by 2.8%.
Income diversification through participation in off-farm and nonfarm
activities is generally poverty reducing (Lanjouw & Lanjouw, 2001). In Zeghe
Peninsula, 36%, 49%, and 33% of the households diversify their incomes
through contractual farming, petty trading, and fishing activities, respec-
tively. Lack of start-up capital to buy fishing equipment is mentioned as
a problem for limited participation. Estimation result indicated that as the
value for participation in contractual farming activities shifts from zero to
one, the probability of the household falling into poverty decreased by
7.9%, at p < 0.1. Likewise, diversification of income through petty trad-
ing (p < 0.05) and fishing (p < 0.01) activities decreased the chance of
household’s falling into poverty by 3.3% and 45%, respectively. Chuol (2001)
also studied the positive contribution of fishing to household’s well-being in
Gambella region of Ethiopia, which is also supported by the findings of this
article. In addition, Zeghe Peninsula has a good potential for bee farming,
given the availability of diversified tree species that flower at different times
of the year and the presence of Lake Tana as a good source of water for
bees. On average, households own about two beehives, and earn 10% of
their annual income from sale of honey. Results of this article confirmed
that as the number of beehives increase by one unit, the chance of the
household to fall into poverty declines by 43%, at p < 0.05. The finding
of this article about the role of income diversification is in line with the
major theoretical argument presented under Lanjouw and Lanjouw (2001)
and has also supported the empirical findings of Delil (2001) and Getaneh
(1997).
 322 M. Shete

Due to frequent drought, coffee productivity has declined in the penin-

sula. Many (67%) households fell trees and sell firewood to augment
their income. About 16% of the proportion of annual income is generated
from sale of firewood. The result showed that participation in firewood-
selling activity increases the chance of falling into poverty by 92% at
p < 0.1. Although participation in firewood-selling activity serves as alter-
native income source in Zeghe Peninsula, its overall impact on household’s
welfare is as expected. The reasons for the negative impact of firewood
selling on households’ well-being status could be explained in terms of
the negative consequence of deforestation on coffee productivity. Source of
fuel wood for about 86% of firewood sellers in the peninsula is their own
farms. However, on coffee farms the cutting of trees creates physical dam-
ages on the coffee plant that decreases the density and vigor of the coffee
plant decreasing the productivity of the plant. Coupled with that, increased
deforestation inside coffee farms decreases the shade service for the remain-
ing coffee plants. This situation exposes the coffee tree to drought and
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decreases coffee productivity. As a result, participation in firewood-selling

activity reduces income of households from their major income source coffee
that puts them in a kind of vicious circle. In line with this, Shibru and Kifle
(1998) contended that there is a vicious circle of environmental degradation
and food insecurity driven by absolute poverty and population growth in
Ethiopia.
The hypothesis for the number of chickens owned toward its likely
impact on household’s well-being status was formulated based on the obser-
vation of Tjoflaat (2002) at Zeghe Peninsula. Although, her findings indicated
that chicken ownership is a sign of better standard of living in Attati and
Gami villages of Zeghe Peninsula, the result of the regression model revealed
that number of chickens owned does not significantly influence households’
well-being status and rather has a sign opposite to the expectation.
Although human capital theory states that education and accumulated
working experience are important determinants of well-being (Lundgren,
2005), the result of this article suggested that primary education of household
head’s wife, primary education of household head, and age of house-
hold head are not important determinants of household’s well-being status.
However, the result supported the finding of Getaneh (1997). On the other
hand, Zeghe Peninsula is well endowed with historical Orthodox churches
that attract domestic and oversea tourists (Jemaneh, 2005). About 21% of the
households are located near tourist attraction sites, and it was expected that
households can earn extra income from tourists that would give them better
chance to escape from poverty. However, the estimation result indicated that
the variable was not found statistically significant. This is explained in terms
of the limited participation of households to earn income from tourists and
due to the fact that the benefits from tourists are not accruing to the commu-
nity; it is rather accruing to tourist guides and to the concerned government
offices.
 Rural Poverty in Ethiopia 323

CONCLUSION

There are at least four dimension of poverty: lack of opportunity expressed

by lack of adequate income/consumption, absence of capabilities expressed
in terms of low level of achievement in education and health, vulnerability
to risks, and voicelessness. This article addressed only the first dimension
of poverty expressed in terms of consumption. Second, well-being is best
studied in a longitudinal study design with repeated measurements (panel
data) than in cross-sectional study design (snap-shot). However, given the
resource limitations, this article used cross-sectional approach. Finally, the
findings of this article came from a study conducted in 2004. Hence, some
figures might have already changed. Therefore, the findings of this article
should be accepted given these limitations.
Poverty is deep rooted in Zeghe Peninsula. As compared to national
averages, magnitude of poverty is huge in terms of incidence, depth, and
severity. Consumption expenditure for the area is lower than national aver-
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ages. Because of high cost of living prevailing in the area, food poverty
line for Zeghe Peninsula was also found to be higher than the national
average. Cooperative societies are believed to increase bargaining power of
members. Hence, organizing households of Zeghe Peninsula into consumer
cooperatives minimizes the transaction costs they are currently incurring,
and thereby decreases prices of consumables.
Dependency ratio, landholding size, suitability of coffee land owned,
number of beehives owned, participation of households in firewood sell-
ing, contractual farming activities, fishing, and petty trading activities are
found to be significant correlates of poverty. Ownership of large landholding
size and suitable coffee lands, engagement in contractual farming, beekeep-
ing, fishing, and petty trading activities contributed to the probability of
households to escape from poverty. Although, participation of households in
firewood-selling activities and the existence of high-dependent family mem-
bers contributed to the probability of the household falling into poverty.
Based on the results, the following recommendations can be forwarded:
Large family size and high dependency burden are found to be problems
in the peninsula that triggers thoughts about introduction of family planning
techniques and population education. Imperfect labor and insurance mar-
kets are the root causes as to why households in developing countries want
to have many children. Creating enabling policy environment for insurance
and labor markets helps to curb the problem.
Engagement of households in fishing activities is the other important
variable that determines households’ welfare. The huge fish potential of Lake
Tana, if utilized in a sustainable manner, can help efforts toward improving
the lives of the people of the peninsula. Needless to say, small proportions
of households are engaged in the activity because of the problem of start-up
capital. Hence, organizing residents of the peninsula into fishing association
 324 M. Shete

and supporting them with start-up capital enables them to purchase motor-
ized boats and standardized fish mesh, which is welfare improving. Income
diversification through bee keeping, petty trading activities, and engage-
ment in contractual farming activities are the other important determinants
of households’ welfare at Zeghe peninsula. Participation of households in
these activities need to be strengthened through addressing the factors that
constrain participation.
Firewood selling is another important variable that negatively affected
households’ well-being. Interventions that regulate the supply and demand
of firewood are important. In the supply side, it is desirable to look for
alternative income sources for those people that are engaged in firewood
selling activity and in the demand side it is desirable to reduce dependence
on firewood as energy source by providing alternative energy sources.
Finally, the study envisaged the following future research areas that are
not touched in the article, but quite important for the well-being of people of
the peninsula. There are arguments in that poverty affects women and chil-
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dren more than men in a given household. Therefore, future research should
address decomposition of poverty at household level. Future research should
address the linkage between the environment and people’s well-being in the
peninsula. Last but not least, well-being monitoring is an ongoing study so
as to analyze factors that contribute for entry to and exit from poverty.

ACKNOWLEDGMENT

The author acknowledges the Ethiopian Agricultural Research Organization/

Agricultural Research and Training Project (EARO/ARTP) and the Addis
Ababa University (AAU) for sponsoring the study. The author also thanks the
three anonymous reviewers of this article for their constructive comments.
However, any omission or error is that of the author.

NOTE

1. One US$ was equivalent to 8.5 Ethiopian birr during the survey period.

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