Linking Taxation and Social Protection: Evidence on Redistribution and Poverty Reduction in Ethiopia
Poverty reduction, and more recently inequality, are pressing concerns in many low and middle-income countries. This is not in the least due as a result of the Sustainable Development Goals committing countries to significant improvements by 2030. In order to reach these goals, redistribution is very important and is shaped by countries’ tax and welfare systems. Despite redistribution resulting from the simultaneous effect of revenue collection and public expenditures, policies and analyses of their distributional effects have largely been undertaken from narrow and singular perspectives. In this paper, it was aimed to jointly assess the distributional effect of taxes and transfers (through social protection) using Ethiopia as a case study. It was found that currently, Ethiopia’s flagship social protection programme is more effective than income taxation in achieving poverty reduction, while neither policy achieves a sizeable reduction in overall inequality. Overall, the findings provide support for the common belief that social spending is more suitable than taxation to achieve redistribution. It was also assessed whether Ethiopia would have the capacity to achieve the desired level of redistribution by applying higher marginal rates on relatively high incomes. The results suggest that Ethiopia does not currently have the capacity to close the poverty gap, or to fully fund its main safety net programme using domestic income sources alone.
"Africa's food systems are changing fast amid rapid economic growth, emerging urbanization, and structural transformation. In this study, we use four rounds of nationally representative data from Ethiopia to examine changes in household food consumption patterns over a period of unprecedented economic growth. We find that while there is a general decline in the share of food in the total consumption basket of households in Ethiopia, food quantities and intake of calories have increased considerably over the period 1996 to 2011. This was mostly driven by improvements in household incomes, as shown using decomposition analysis. Furthermore, the content of the food basket is changing with a gradual shift towards high-value foods, such as animal products, fruits and vegetables, and processed foods. However, irrespective of the level of income, a heavy focus on starchy staples in the Ethiopian diet remains. Overall, this diet transformation has important implications for the food security debate and for agricultural and food policy in the country."
"In this research note, we provide a preview of results from a study of agricultural mechanization in Ethiopia. Our research shows that 9 percent of farmers in the Feed the Future regions of Ethiopia used mechanization at some point during the agricultural year 2014/15. We find that mechanized ploughing was most widespread (5 percent), while mechanized threshing and harvesting was reported by 3 and 2 percent of households, respectively. We further examine the uptake of different forms of mechanization through a number of associations. The results show that farm size and rural wages are positively associated with the adoption of mechanization, while remoteness is negatively linked. These findings suggest that as Ethiopia’s economy transforms and leads to higher rural wages, as well as with further development of its infrastructure, more demand for mechanized agricultural services will likely arise. Having policies that actively assure widespread availability of appropriate mechanized services at low cost, seem likely to benefit Ethiopia’s agricultural transformation."
"Chronic undernutrition in Ethiopia is widespread and many children consume highly monotonous diets. To improve feeding practices in Ethiopia, a strong focus in nutrition programming has been placed on improving the nutrition knowledge of caregivers. In this paper, we study the impact of improving nutrition knowledge within households and its complementarity with market access. To test whether the effect of nutrition knowledge on children’s dietary diversity depends on market access, we use survey data from an area with a large variation in transportation costs over a relatively short distance. This allows us to carefully assess the impact of households’ nutrition knowledge with varying access to markets, but still within similar agro-climatic conditions. We find that nutrition knowledge leads to considerable improvements in children’s diets, but only in areas with relatively good market access."