Urbanization is Improving Household Welfare in Ethiopia

These findings highlight important factors that should inform public policy debates on the consequences and implications of urban expansion in Africa. The finding that urban expansion can improve household welfare suggests that when small rural towns grow, people have a broader range of economic opportunities, including work outside of the farming sector. However, some populations benefit slightly more from this growth than others. Households that are already better-off enjoy a slightly greater improvement in welfare than the households at the bottom of the welfare distribution. That these effects are small suggests the positive impact of urban expansion on welfare may outweigh the negative effects. These findings highlight the trade-off countries face when towns expand: household welfare improves, but welfare inequality also slightly increases. This effect reinforces the need to regulate and monitor existing urban expansion in Ethiopia so that more areas of society can benefit from the advantages it brings.