Dynamics of Multidimensional Poverty in the Context of Climate-Induced Shocks : The Ethiopian Perspective

This paper examines the effect of climate-induced shocks on multidimensional poverty in Ethiopia using data from the Ethiopian Socioeconomic Survey (ESS) collected under the Living Standard Measurement Study-Integrated Surveys on Agriculture (LSMS-ISA) of the World Bank. The empirical strategy used for the study is dynamic mixed probit regression that helps to account for unobserved heterogeneity by assuming state dependence of multidimensional poverty over time. Households that faced drought shocks, high rainfall, older households, more adult equivalents, better farm assets, more income from PSNP, access to extension and credit, households living in rural areas, and Afar region and Dire Diwa city administration are more prone to experience poverty and have a low chance of exiting poverty. However, households with a higher dependency ratio, who are better educated, have more noncultivated land, and live in the Somalie and Harari regions are less exposed to multidimensional poverty and have a high chance of exiting from multidimensional poverty counterfactuals. The study revealed that the standard of living dimension is the most significant contributor to multidimensional poverty for rural and small towns. The previous poverty status of households has a substantial and positive impact on their future experience of multidimensional poverty. To improve multidimensional poverty in all forms, a one-size-fits-all policy may not produce notable outcomes. Therefore, policymakers should target households experiencing a multidimensional poverty trap to fight poverty and give priority to attributes such as climate-induced shocks, regional variations, and household characteristics