rural-urban transformation in ethiopia - implications for development strategies

ETHIOPIAN DEVELOPMENT RESEARCH INSTITUTE

The Rural-Urban Transformation in Ethiopia:

Implications for Development Strategy

Paul Dorosh and Emily SchmidtIFPRI ESSP-II

Ethiopian Economic Association ConferenceJune 24, 2010Addis Ababa

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Ethiopia Strategy Support Program – II (2008-2012)

• Goal: Enhance national capacity for evidence-based policies for pro-poor growth• Objectives

– Generate policy research results to fill key knowledge gaps– Build a stronger and more integrated knowledge support system– Strengthen the capacity of Ethiopian policy research institutions – Contribute to the design and implementation of a national monitoring and

evaluation system for the rural sector• Main/Major Activities

– Joint evidence-based, policy-relevant research with EDRI and other institutions: (ex. determinants of agricultural productivity, implications of foreign exchange rationing, rural-urban transformation, watershed investments)

– Capacity building through institutional support to EDRI, CSA, MoARD, training courses. and funding of five PhD students at international universities

– Dissemination of research results through workshops, conferences, internet and publications

• Donors: USAID, DFID, CIDA, Irish Aid

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Plan of Presentation

• Ethiopia’s changing economic landscape– Structural shifts: sectoral and spatial– A brand new world for economic development

• Research papers– Rural-Urban Migration in Ethiopia (Valerie Mueller and Tassew

Woldehanna)– Trends in Household Expenditure and Welfare (Kibrom Tafere and

Alemayehu Seyoum Taffesse)– Rural and Urban Policies Affecting Spatial and Sectoral Linkages

Getnet Alemu) – CGE Analysis of the Rural-Urban Transformation (Paul Dorosh and

James Thurlow)

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Ethiopia’s Changing Economic Landscape

• Structural shift of the economy – Sectoral (declining share of agriculture)– Spatial (urbanization)

• A new era for economic development– Infrastructure (expanding road networks)– Electricity generation and use (even exports?!)– Telecommunications (mobile phones and internet)– Education and health

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Structural Transformation

• Economic transformation (share of agriculture in total GDP)– Comparisons with other East African countries

• Rapid agricultural growth• Industrial growth• Growth linkages and ADLI• Agricultural growth and poverty reduction

(CAADP Analysis)

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Production and Real Prices of Major Cereals in Ethiopia, 2000/01 to 2008/09

Source: Dorosh and Ahmed (2009).

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Ethiopia: Economic Structure1999/00 – 2008/09

Source: Calculated from World Bank, World Development Indicators data.

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0

20

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60

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1999

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2007

/08

(200

8/09

)

Agr

ic S

hare

of G

DP

(%)

billi

on (

1999

/200

0) B

irr

Agriculture Industry Electricity and Water

Construction Other Private Services Public Administration

Agric Share of GDP

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Economic Transformation in East Africa:Agricultural Share in GDP, 1980s-2000s

Source: Calculated from World Bank, World Development Indicators.

1980s 1990s 2000sEthiopia 56.5 58.4 45.6

Burundi 58.1 50.8 39.2

Kenya 32.4 30.7 27.9

Rwanda 40.2 40.6 38.0

Sudan 35.4 42.1 35.2

Uganda 57.6 47.9 26.2

East Africa 46.7 45.1 35.4

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Economic Transformation in East Africa:Agricultural Share in GDP, 1980-2008

Source: Calculated from World Bank, World Development Indicators data.

0

10

20

30

40

50

60

70

8019

8019

8219

8419

8619

8819

9019

9219

9419

9619

9820

0020

0220

0420

0620

08

Shar

e of

GD

P (%

) Ethiopia

Kenya

Uganda

Expon. (Ethiopia)

Expon. (Kenya)

Expon. (Uganda)

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Ethiopia: Industrial Output and Growth1999/00 to 2008/09

Source: Calculated from Ministry of Finance national account statistics.

2008/09 Growth Rate2008/09 Share of GDP 1999/00-08/09

(bn Birr) (percent) (percent)Agriculture 160.6 50.3% 7.0%Industry 34.0 10.7% 9.2% Mining 1.3 0.4% 4.2% Large, Medium Scale Manuf 8.6 2.7% 8.1% Small Scale, Cottage Industries 4.0 1.3% 5.8% Electricity and Water 4.0 1.3% 7.6% Construction 16.1 5.0% 12.3%Other Private Services 114.2 35.8% 11.2%Public Administration 10.3 3.2% 4.2%Total 319.2 100.0% 8.6%

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Topography within Ethiopia is varied and fragmented within and among regions.

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Rainfall is highest and least variable in the western part of the country and the western slopes of mountains

Annual rainfall varies across space

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Agro-ecological Zones (AEZ’s): “3 Ethiopias” split into 5 AEZs

Source: 2005/06 EDRI Social Accounting Matrix.

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Agricultural Value Added by Agro-Ecological Zone

Zone 2: Rainfall sufficient highlands (cereal – based)Zone 3: Rainfall sufficient highlands (enset – based) – most of SNNPRZone 4: Drought proneSource: 2005/06 EDRI Social Accounting Matrix.

bn birr (2005/06) SharesZone 2 Zone 3 Zone 4 Zone 2 Zone 3 Zone 4

Teff 2.75 0.29 1.41 10.8% 3.7% 9.3%Wheat 2.31 0.26 0.88 9.1% 3.2% 5.8%Maize 2.71 0.75 1.09 10.7% 9.4% 7.2%Bar/Sor 2.47 0.20 1.61 9.7% 2.6% 10.6%Enset 0.25 0.66 0.44 1.0% 8.2% 2.9%Exp Crops 3.78 2.01 3.08 14.9% 25.1% 20.3%Oth Agric 3.64 2.09 2.35 14.3% 26.2% 15.5%Livestock 7.47 1.72 4.34 29.4% 21.6% 28.6%Total 25.38 7.97 15.19 100.0% 100.0% 100.0%

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Zone 2 Zone 3Va

lue

Adde

d (b

n 20

05-0

6 Bi

rr)

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Agricultural Growth and Poverty CAADP CGE Baseline Scenario

• Agriculture– Land cultivated for each crop follows medium-term trends: total land

cultivated increases 2.6% per year, 2009-2015– Land growth varies across region (1.2% per year in rainfall sufficient

areas, 3.2% per year in drought-prone areas, 3.7% per year in pastoralist areas)

– Crop yield increases account for one-third of the crop production growth

– Overall agricultural GDP growth: 4.0%/year– Note: population growth rate is 3.0 percent/year

• Non-agricultural output growth based on historical medium-term trends: – Manufacturing: 6.5% per year– Services: 6.7% per year

Source: Dorosh and Thurlow (2009), ESSP2 Discussion Paper No. 2.

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Ethiopia: Impacts of Growth on Poverty

22.7

17.6

40.0

13.3

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15

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25

30

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2005 06 07 08 09 10 11 12 13 14 15

Nati

onal

pov

erty

hea

dcou

nt (%

)

Baseline scenario

All agriculture scenario

With non-agriculture scenario

Source: Dorosh and Thurlow (2009), ESSP2 Discussion Paper No. 2.

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Ethiopia’s Spatial Transformation:Urbanization of Population and Economic Activity

• Travel times and agglomeration

• Urbanization: Ethiopia and East Africa

• Ethiopia: City Size

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• In order to standardize urbanization measurements, we use methodology developed by Uchida and Nelson (2009):

• Urban areas are identified spatially using specific thresholds:– A population density greater than 150 people per km2; – Populations located within 1 hour travel time to a city of at least

50,000 people.– City centers of at least 50,000 people

Agglomeration Index: measuring urban expansion

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Euclidean Distance (straight line distance) or distance in kilometers may not take into account specific localized biophysical factors

– In order to measure travel time to a major city:

Estimation of Travel Times – A series of GIS layers are merged into a ‘friction layer’ which

represents the time required to cross each pixel– Road type and class

» Paved – all weather» Paved – dry weather» Gravel – all weather» Gravel – dry weather» Earth

– Waterbodies– Landcover– Slope

Travel Time and Agglomeration Index (Urbanization)

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Ethiopia: UrbanizationOfficial Agglomeration

Estimate Index(percent) (percent)

1984 11.4% 3.7%1994 13.7% 7.1%2007 15.9% 14.2%

(mns people) (mns people)1984 4.55 1.481994 7.33 3.802007 11.72 10.50

(growth rate) (growth rate)1984-1994 4.9% 9.9%1994-2007 3.7% 8.1%1984-2007 4.2% 8.9%

Ethiopia is urbanizing faster than people think!!!

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Ethiopia: Alternative Urbanization Estimates

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1984 1994 2007

(mill

ions

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Agglomeration Index Official CSA

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Urbanization in East Africa2000 to 2005

Source: Calculated from World Bank, World Development Report data.

Total Urban Agglom. Pop Cities Pop. LargestPopulation Population Index > 1mn City

2005 2005 2000 2000 2005 2005 2005(mns) (mns) (percent) (percent) (percent) (% tot pop) (% urban pop)

Ethiopia 71 11 11.9 14.9 16.0 3.8 24.1Burundi 8 1 31.7 8.6 10.0 0 n.a.Kenya 34 7 25.4 19.7 20.7 7.8 37.6Rwanda 9 2 14.3 13.8 19.3 0 43.7Sudan 36 15 31.9 36.1 40.8 12.2 30.0Uganda 29 4 28.0 12.1 12.6 4.6 36.2

East Africa 187 39 21.7 19.1 21.0 5.9Nigeria 132 63.6 40.8 43.9 48.2 13.3 16

Urbanization

Ethiopia: Urban Population by City Size2007/08

Population Population Population Agglom Agglom

Census Census Census Indexd Index(thousands) (share of total) (share of cities) (thousands) (share of total)

Large Citiesa 3,070 4.0% 42.5% 4,545 6.0%

Small Citiesb 4,146 5.4% 57.5% 6,136 8.2% 50,000+ 2,379 3.1% 33.0% 3,522 4.7% 20,000 - 50,000 1,766 2.3% 24.5% 2,615 3.5%

Other Urbanc 5,132 6.6% --- --- --- Total Urban 12,348 16.0% --- 10,681 14.2%Rural 64,825 84.0% --- 64,536 85.8%Total Population 77,173 100.0% --- 75,217 100.0%

Source: World Bank Development Report 2009, World Development Indicators.

Note: Average agglomeration for 2000 is calculated using 2005 population weights.

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Ethiopia: Population by City Size

2,738

2,712

1,794

Addis AbabaCities > 50kCities 20k - 50k

Population (thousands) by City Size: 2007(Cities 20k and greater)

1984 1994 2007

Addis Ababa 1,423 2,085 2,738

Cities > 50k 626 1,121 2,712

Cities 20k - 50k 312 887 1,794

Total 2,361 4,093 7,244

Population (thousands) by City Size (Cities 20k and greater)

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• Infrastructure (expanding road networks)• Electricity generation and use (even exports?!)• Telecommunications (mobile phones and

internet)• Education and health

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Road Infrastructure and UrbanizationTravel Time 1984

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Road Infrastructure and Urbanization Travel Time 1994

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Road Infrastructure and Urbanization Travel Time 2007

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Ethiopia: Percent Population connected to Urban Agglomeration

1984 1997 2007 -

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

0%

10%

20%

30%

40%

50%

60%

Under 1 hour 1- 3 hoursShare of Total Population

Source: Schmidt and Kedir (2009)

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Agglomeration Index 1984Urban Expansion: Greater Addis Ababa

In 1984, Addis Ababa and other larger cities were primarily confined to its city administrative boundaries.

There were only a few cities with greater than 50,000 people

Limited road networks and more dispersed population characterized the demographic landscape.

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Agglomeration Index 1994By 1994, Ethiopia’s cities grew, and the country’s transportation network expanded

Urban corridors formed between Addis Ababa and Nazaret

Shashamene and Awasa also formed an urban network between Oromia and SNNP regions.

Jimma urbanization is also expanding along key road networks

Urban Expansion: Greater Addis Ababa

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Agglomeration Index 2007By 2007, urban linkages were clearly visible throughout Oromia, SNNP, and Amhara regions.

Addis Ababa expanded to connect Sebeta and Bishoftu, and Asela in the South.

Addis Ababa also connected to Ambo in the west, and Debre Berhan in the east

Jimma had grown into a southwestern hub with opportunities to link with Nekemte to the north.

Urban Expansion: Greater Addis Ababa

Population Density and Agglomeration: 1994(Increasing Urbanization in SNNPR)

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Population Density and Urbanization: 2007 (Increasing Urbanization in SNNPR)

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Ethiopia: Electricity Generation Capacity1958 to 2011*

Capacity Capacity Capacity CapacityHydro-electric Other Total Per capita

(megawatts) (megawatts) (megawatts) (watts/person)1959 0.0 2.3 2.3 0.11960-69 62.8 2.5 65.4 2.41970-79 152.9 3.0 155.9 4.71980-89 202.8 4.7 207.5 4.91990-99 325.2 9.0 334.2 6.02000-04 452.6 25.0 477.6 6.92005-09 747.2 50.2 797.4 10.02010 1447.5 50.2 1497.7 17.42011* 1867.5 50.2 1917.7 21.7

Source: Calculated using CSA Survey of Manufacturing (various years) and Ethiopian Electric Power Corporation data. Notes: Figures for 2008-10 based on additional capacity from Tekeze I (300 Mw) in 2009; and Tana Beles (460 Mw) in 2010. 2011 figures is 2010 figure plus Gile Gibe II (420 Mw) for which the tunnel collapsed in December, 2009.

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Meg

awatt

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Total Installed Capacity Non-Hydro Capacity

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atts)

Total Installed Capacity Non-Hydro Capacity Capacity/capita

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Ethiopia: Fixed Line and Cellular Telephones2003 to 2010

Sources: ITU (2009). Information Society Statistical Profiles 2009 - Africa, International Telecommunication Union (ITU). Ethiopian Telecommunications Corporation (ETC). ETC Strategic Plan. http://www.ethionet.et/aboutus/visionmission.html

2003 20082009

(plan)2010

(plan)Main (fixed) telephone lines Ethiopia 405 909 3,000 4,400 Africa 9,553 10,617 --- ---

Mobile cellular subscriptions ('000s) Ethiopia 51 3,168 7,500 9,900 Africa 35,251 245,608 --- ---

Mobile cellular subscriptions (per 100 people) Ethiopia (share of total population) 0.1 3.9 9.0 11.5 Ethiopia (share in connected area) 0.1 5.3 --- --- Africa (share in connected area) 3.7 32.5 --- ---

http://www.ethionet.et/aboutus/visionmission.html

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Ethiopia: Fixed Line and Cellular Telephones2003 to 2010

Sources: ITU (2009). Information Society Statistical Profiles 2009 - Africa, International Telecommunication Union (ITU). Ethiopian Telecommunications Corporation (ETC). ETC Strategic Plan. http://www.ethionet.et/aboutus/visionmission.html

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Cellular Phones Fixed Lines

http://www.ethionet.et/aboutus/visionmission.html

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Net Primary School Enrollment

All Children Girls

1991 2000 2007 1991 2000 2007

Ethiopia 21.9 38.4 71.4 18.8 32.5 68.5

Burundi 53 42.6 81.2 48.8 38.8 80.3

Kenya --- 66.2 86.3 --- 67.1 86.3

Rwanda 66.9 --- 93.6 65 --- 94.9

Sudan --- 41.2 --- --- 37.2 ---

Uganda 51.1 0 94.6 46.2 0 96.1

Source: World Bank World Development Indicators.

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Ethiopia Food Security Index

2000

2005

2000

2005

2000

2005

2000

2005

Prevalence of Calorie Undernourishment

Prevalence of underweight

among children < 5 years

Under 5 mortality rate

Ethiopia Food Se-curity Index

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

Large Urban

Small Urban

Rural

Source: Household Income Consumption Expenditure Survey, and the Demographic and Health Survey from 1999/2000 and 2004/05*The calculated calorie-based undernutrition for Ethiopia is based on the undernourishment cutoff of 1,990 kilocalories per day**Proportion of underweight children less than five years of age is calculated as a weight-for-age was less than two standard deviations

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Plan of Presentation• Ethiopia’s changing economic landscape

– Structural shifts: sectoral and spatial– A brand new world for economic development

• Research papers– Rural-Urban Migration in Ethiopia (Valerie Mueller and Tassew

Woldehanna)– Trends in Household Expenditure and Welfare (Kibrom Tafere and

Alemayehu Seyoum Taffesse)– Rural and Urban Policies Affecting Spatial and Sectoral Linkages

Getnet Alemu) – CGE Analysis of the Rural-Urban Transformation (Paul Dorosh and

James Thurlow)

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Rural – Urban Migration

Source: de Brauw et al., (2010).

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Rural – Urban Expenditure and WelfarePoverty Incidence

3032343638404244464850

1995/96 1999/00 2004/05

(per

cent

)

Rural Urban Total

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ERHS: Self-Reported Perceptions of Poverty

2009

2004

1994

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2

1

8

11

20

33

13

13

8

DestitutePoorNever quite enoughCan get byComfortableRich, very rich

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Land Policies and Migration

• Regional governments' proclamations restrict access to rural land by prescribing the need to be a rural resident in that particular region as a condition for acquiring rural land free of charge.

• No right to transfer land right on sale or in exchange with another property

• No easy transferability of land rights: transfer of use right in the form of inheritance and donation is allowed only to the right holder's family members who are residing in the rural kebele and are engaged or wish to engage in agriculture.

• These policies inhibit migration from rural areas.

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Implications for Development StrategyCGE Analysis

• Implications on accelerated rural-urban migration

• Analysis of alternative investments– Large urban centers– Small urban centers– Rural

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Conclusions: Development Strategy

• Sectoral allocation of public investments– Agriculture Development Led Industrialization (ADLI) or

greater emphasis on urban investment?

• Land and Migration Regulations:– Easing of regulations?

• Prohibition of sale of land, loss of land rights for those who leave rural areas

• Registration requirements for new migrants

• Reliable empirical economic analysis can shed light on these issues– Hopefully, these papers will spur this research.