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2012-05-30 | Peer Reviewed

Does the Nonfarm Economy Offer Pathways for Upward Mobility? Evidence from a Panel Data Study in Ethiopia

Bezu, Sosina, Christopher B. Barrett, and Stein T. Holden, 2012, "Does the Nonfarm Economy Offer Pathways for Upward Mobility? Evidence from a Panel Data Study in Ethiopia", World Development, 40(80):1634-1646, 12 May 2012.
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Empirical studies across many developing countries routinely document a positive correlation between participation in rural nonfarm employment and households’ wealth or income.

This paper explores whether nonfarm employment leads to higher consumption expenditure growth in Ethiopia. We find that: (1) households’ consumption expenditure growth is positively correlated with the initial share of nonfarm income; (2) the growth elasticity of nonfarm income share is higher for wealthier households; and (3) the main source of growth for nonfarm participants comes from the higher rates of return participants enjoy on their human and physical capital.