The Ethiopian National

Synthesis Report
Berhanu Nega
The real story: Broad Conclusion
Not much positive externality in almost all the
modules coming from Ethiopian agriculture as it is
currently operating
The few positive externalities are largely a result of
the backwardness of agriculture, which are likely to
change with development.
These positive externalities include:
Environment: Low external input, thus forex saving
(in the enset culture) less water contamination,
existence of genetic diversity (coffee, enset),
landscape amenities (open field agriculture…etc. a
reminiscence of 17th century Europe?)
Low rural urban migration: Although the opposite is
what is desirable under Ethiopian circumstances
 Factors inhibiting positive roles and
externalities
Structure of production: micro and decreasing size
holding, low technology, low skill, rain dependent
agriculture
Policy and institutional configuration: land policy
(insecurity, absence of land markets, diminishing size
holding, inhibiting migration, powerlessness); the nature of
liberalization, (effect on output prices and inputs);
Agriculture Development Led Industrialization (only
technology improvements emphasized without institutional
and structural change)
Population pressure: land holding size and environmental
implications (farming marginal areas, hill sides,
deforestation…etc.)
Spatial Imbalance: very low urbanization affecting demand,
and thus agri.prices.
 Agriculture’s share in GDP

1960/61- 1974/75- 1991/92- 1960/61-

73/74 90/91 02/03 02/03

Agriculture & allied 68.1 55.6 47.9 57.9

activities
Industry 9.2 11.4 10.7 10.5

Distributive services 11.6 14.2 14.3 13.3

Other services 11.1 18.7 27.1 18.2

Public Administration & 3.4 7 12.1 5.1

Defense
 Long Term Growth Performance
1960/61- 1974/75- 1991/92- 1997/98- 1991/92- 1960/61-
73/74 90/91 96/97 02/03 02/03 02/03
Agriculture & 2.1 0.6 3.5 -1.5 1.7 1.4
allied
activities
Industry 7 3.6 7.4 4.7 5.6 3.3
Distributive 7.8 2.5 8.2 4.9 6.5 3.5
services

Other services 6.9 4.8 6.4 7.3 7.5 5.6

GDP 3.7 1.9 5.1 2.5 4.5 2.6
Per capita GDP 1.5 -0.9 2 -0.13 1.5 -0.1
Per capita GDP: -0.08 -2.2 0.7 -3.4 -0.9 -1.2
Agrarian

Per capita GDP: 4.3 0.2 2.3 1.6 2.4 0.8

Non-
agriculture
 Agriculture’s Contribution to Growth
1960/61- 1974/75- 1991/92- 1960/61-
73/74 90/91 02/03 02/03

Agriculture & allied 38.5 16.5 18.5 30.8

activities
Industry 17.5 20.8 13.4 13.5

Distributive services 24.4 17.8 20.6 17.9

Other services 20.4 44.9 47.2 39.4

Public Administration & 6.4 20.7 28.2 18.4

Defense
Per capita value-added in the agricultural sector has
been declining by about 1.2% for the last four decades
 II. Policy module
Objectives:
to examine the policy setting in the 1990s
to study the impact of new policies on
selected roles of agriculture
The contribution of agriculture to food security
has continued to deteriorate in Ethiopia.

The disparity between urban and rural

productivity has increased from 4.4 in 1987
to 4.7 in 1997.
The impact of various economic policies and
reforms of the 1990s hasn't been satisfactory.
Although government development strategy
favours agriculture over other sectors, actions are
not commensurate with rhetoric
The economic reform program (ERP) has failed to
direct available credit to the agricultural sector.
B/N 1991-98 Credit to Agriculture(14.7%), domestic
trade ( 32.2%), industry (13.2%).
The volatility of prices for agricultural products is
another problem.
Prices fell by up to 25 percent, during the 1996 and
2001 bumper harvest years
Government expenditure for and revenue from
agriculture have not been satisfactory.
share in total government expenditure was
27.6% in 2000/01 and share in total
government revenue was 2.3% in 1999/00.
The Sustainable Development and Poverty
Reduction Program (SDPRP) has been
implemented.
Components: ADLI, Judiciary and Civil Service
Reform, Decentralization and Empowerment, and
Capacity Building.
ADLI and PADETES have been criticized
theoretical/conceptual and empirical grounds.
institutional factors (land policy, land
administration…etc.) have significantly affected
the performance and role of agriculture.
The input and output markets and extension and
research systems are not generally in favor of
agriculture.
Three areas that need attention to boost the
agriculture sector including ag. exports
raising the income of producers of
agricultural exports by reducing the gap
between export prices and farm gate prices.
encouraging modern technologies.
developing the interface between the rural
and urban sectors.
 III. Environmental Role module
Objective: to identify and capture the positive and
negative roles of agriculture in Ethiopia.
Research activities involved two elements:
national level assessment and farming system
based case study.
Five Environmental externalities were assessed:
Soil erosion and off-site impacts (-)
water availability and water contamination (+)
on-farm conservation of bio-diversity (+)
air quality (+)
landscape amenities (+)
Two case studies: the enset-coffee-livestock
based system and the highland cereal
system.
Findings:
Major positive externality: Conservation and
management of agricultural bio-diversity
The Economic value:
1)Avoiding fertilizer use and foreign
exchange saving.
USD12,505,813/year saved from
fertilizer avoidance in the inset culture.
2) aversion of coffee production loss due to coffee berry
disease (CBD) resistant varieties
An estimated loss of 830 million was averted during
the world’s three CBD years of 1970 1976 and 1982.
reducing the degree of soil erosion
Estimated annual income loss due to soil erosion :
US $150 million in 1998.
The Ethiopian coffee population provides genetic stock for
crop improvement breeding worldwide.
Other externalities:
Agricultural use of water does not cause water
scarcity for non-agriculture. (traditional, rain fed
agriculture with very little irrigation)
limited concern about the harmful environmental
effects of fertilizer use. (20 kg per ha.)
Agriculture in Ethiopia is more of a sink than a source
of green house gases.
The aesthetic value of agricultural landscape. (Tourist
identification of the exotic nature of traditional ag.)
Major negative externalities: deforestation
and soil erosion.
soil erosion inflicts external or off-site costs
through the process of sedimentation.
An estimated loss of Birr 60 million was
incurred as a result of siltation.
Policy recommendations:
The need for land use policy
Reduce deforestation
Favourable policy on tenure security
Catchment protection to reduce reservoir
siltation
 IV. Food Security Role Module
The food security role of agriculture is
investigated at two levels: at the national and
household levels.
The various approaches in the study include:
Review of indicators of national food security:
Measures of the risk of national consumption
shortfall beyond a certain level of trend
consumption;
During 1999/2000 average cereal supply per
person ranged between 122 to 158 Kg
Average yield of major cereals didn’t improve
from its level of 1ton per hectare 25 years ago.
Famine affected population during drought
years increased from about 1.5 million in
1972/73 to about 7 million in 1984/85 and about
14 million people in 2002/03
The structural deficit is about 6 million people
Projection of famine affected population will
reach about 42% by 2020 (i.e 3.4% growth
rate/annum)
 Trend of per capita cereal and pulses production

250

200
Kg/person

150

100

50

0
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
Per capita cereal + pulses (kg) Year
The national level food security situation:
average daily energy supply:1880 kcal/cap,
44% of the population is undernourished; and 47% of
under 5 children are underweight.
Ethiopia heavily relies on food aid which averages at about
800,000 MT/ year.

The benefits of increased domestic production:

Supply response of cereals to own price is estimated at
0.38%
A 40% price increase, for example, will reduce
expenditure for food imports by 50%
Foreign exchange is a very important constraint for food
security in Ethiopia
The country relies on limited export earning base (e.g.
coffee) for commercial food import
Food import average at 199 and 172 million USD
during 1990-1995 and 1990–2000, respectively.
These amounts relate to 65% and 44% of export
earning less debt repayment.
Household level food security
Rural households spend 61% of their income on
food, while in urban households it is 46%.
74% of total earnings in rural households comes
from agriculture and 17% from remittances.
Rainfall and soil fertility explain the largest share
of variability of rural income.
In rural areas average per capita nutrient intake
per day is 2032 Kcal of energy, 55gms protein and
60gms of fat while these are 2300 kcal, 63gms and
40gms respectively in urban areas.
 Agricultural growth impact on poverty
Poverty Situation:
Proportion of people in food poverty is 52% in
rural and 36% in urban
1995/96 poverty level was 45.5% and 44.2% in
1999/2000
Current poverty estimate is 47.5%
Seven channels through which agriculture
affects poverty are identified
Food Channel
Income Channel
Price Channel
Non-farm employment channel
Off-farm employment channel
Wage Channel
Government revenue channel
Four are major transmission mechanisms: Food,
income, price and employment
Agricultural Growth Elasticity of Poverty
Growth elasticity of Growth elasticity of
poverty = -0.76 poverty = -0.4
(previous (Actual)
estimates) Agricultural growth
Agricultural growth elasticity of GDP
elasticity of GDP growth = 0.32
growth = 0.32 
 Agricultural growth
Agricultural growth elasticity of poverty
elasticity of poverty = -0.13
= -0.24
 Rural Poverty Estimates for 2000 under different
assumptions
Growth Implied Estimated Chang Elasticity
rate – change Po . in Po
annual in 5-year

Actual 1995-2000 trend -3.4 -15.9 63.6 58% -3.62

in agr. Percapita
(considering inflation)

Actual 1995-2000 trend -3.4 -15.9 53.7 34% -2.12

in agr. Percapita
(assuming no inflation)

Long-term trend in agr. -1.6 -7.8 46.5 16% -0.98

Percapita growth
(assuming no inflation)
 Rural Poverty Estimates for 2015 under
different assumptions
Po

Simple forecast (trend) 39.0

Based on long-term Agr. Percapita 65.2

value added growth (-1.6)

Under best scenario (using first half 34.3

EPRDF period (0.04)
The results of the calculation of elasticities
shows that if agriculture grows, it would have
significant impact on poverty reduction.
 VI. Buffer Role Module
Objective:
to assess the potential of Ethiopian agriculture as
a buffer in times of crisis.
Analysis is made based on the aggregated
national data and household level data.
At macro data from Published materials and data
from agencies and institutions: CSA, MoLSA and
others .
The household level data from rural and urban
surveys of AAU
Specific data regarding remittances and migration
could not be obtained.
Problem of unemployment has become a serious issue in
urban Ethiopia.
Sharp decline in the rate of growth of urban based
employment opportunities
The highest rate of unemployment was experienced by the
youth (43.1%) while adult job seekers took the next
position (41.4%) in 1984.
The direct way of assessing the contribution of rural
households to non-agricultural dependents is not possible
in the Ethiopian case. (No remittance from rural to urban
house holds could be identified both from national data
and from survey conducted for this purpose)
For brevity, using the data on remittances from urban to
rural areas, a Tobit model is used to examine the purpose
of remittance flows from urban areas to rural to check if
self interest or altruism explain the reasons for
remittances.
Conclusion:
the ability of agriculture to act as a buffer hinges
on the sector’s performance during a crisis.
Poverty is getting serious in urban areas but the
situation in rural areas is more daunting.
The low level of urban-to rural migration, and the
virtual absence of remittances going from
agriculture to urban households indicate the low
capacity of the agricultural sector to support
urban households in case of adverse economic
circumstances in urban areas.
Self-interest motive doesn’t dominate in urban
households’ decisions to remit to rural
households
 VII. Social Viability Role Module
Overall Objective: Establish the contribution of
agriculture to social viability in the form
of spatial population balance
Data Sources and Method: Use of existing macro-
level data and primary data generated for the
purpose of this study through surveys and focus-
group discussions carried out at two
representative sites of the two farming systems
(enset-coffee complex farming system and
highland cereal farming system).
Secondary sources of data: CSA census,
statistical abstracts and published and
unpublished reports.
Primary data generated through: survey and
focus-group discussions in two representative4
To this effect the study has:
Assessed the spatial distribution of the
population, as well as the features of the
population and migration at the national an d
city (Addis Ababa) level
Using the Harris-Todaro Model, identified the
main determinants of rural-urban migration,
and estimated their respective contribution
Estimated the social costs of migration to
urban administrations
Estimated the optimal rate of rural to urban
migration, and looked into how this relates to
the actual level.
Illustrated the interplay between land tenure,
farming system and agricultural production
and transformation.
Recent population estimates for Ethiopia: 70.7
million of which 83.8% resides in rural areas.
44.7% of the total urban population and 9.2% of
the total rural population consist of migrants.
In 1994, of the four major categories of internal
migrations the rural-rural migration ranked first
(48.9%), followed by rural-urban migration (24.8%).
Addis Ababa is by far the only truly metropolitan
city with more than 3 million residents amounting
to 24% of the total urban population.
From the estimated model, rural-urban income
differentials affect migration
Fertilizer use, investment in agricultural
machinery, investment in livestock and
education all have the capacity to increase
productivity in agriculture and hence
minimize implicit wage differentials and thus
reduce rural-urban migration.
A simultaneous 1% increase in the use of these
three agricultural inputs would result in the
reduction of the rural-urban migration by about
6.2%.
Estimated per capita marginal urban absorption
cost is Birr 5,139.
The average rate of migration measured as a
proportion of the rural population for the years
1980 to 2001 was about 0.25%.
The equilibrium (optimal) rate of migration (where
the present value of future expected real income in
both areas is equalized) measured relative to the
rural labor force is about 1.96%.
This implies that the optimal number of migrants
to be about four times (485,000 per annum)
compared with the actual number of migrants
(114,000 per annum) for the period 1980 to 2001.
One reason for the low rate of migration is
the land tenure policy.
This was supported by evidence from the
different farming systems where different
tenure security prevails (largely owing to
differences in social organization rather than
differing de jure tenure arrangements.)
It would be erroneous to consider this very
low rate of rural-urban migration a positive
externality of agriculture.
But, this was made possible because of food
aid that made up for the chronic food deficit.
 Conclusion
Positive externalities from agriculture are hard to
come by in the Ethiopian context.
An archaic production system with a suffocating
property rights regime and a population pressure
partly owing to very low urbanization responsible
for the sector’s poor performance.
Structural transformation of agriculture (from
traditional to modern) along with the
transformation of the economy (from
predominantly agricultural to non-agricultural) is
crucial.
THANK YOU!