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Determinants of Low Growth in Ethiopia: Beyond the Traditional Factors

Abstract: 

<p>Traditional growth models focus on modelling conventional factors such as labour, physical capital, and human capital. Determinants of economic growth in developing countries operate in different manner from that of developed countries as economic decisions are made under uncertainty and risk in developing countries. In this paper, we tried to model growth in Ethiopia by including non-traditional factors such as rainfall and foreign exchange constraints along with conventional determinants of growth namely labour, capital, and index for human capital using the Johansen approach of co-integration analysis. It has been found that there is one co-integrating vector where in capital was not statistically significant in affecting long-term growth probably due to the fact that capital is conditional upon availability of rainfall; undercapacity utilization, and existence of a relatively meagre capital in the agricultural sector. With a robust result using standard econometric techniques, the long-term path that has been estimated is a low level trajectory. The paper forwards questions on the deep fundamentals underlying the low level equilibrium of the Ethiopian economy such as culture, history, governance and the like which do not readily lend hand to the standard econometric techniques developed so far. Looking into such fundamentals is a future research agenda</p>

Corporate Author: 
Alemayehu Seyoum(Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: 
Ethiopian Economic Association (EEA)
Primary Descriptors: 

<p>poor</p>

Secondary Descriptor: 

<p>Economic condition</p>

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
02/27/2013
Broad Subject heading: 
GROWTH AND DEVELOPMENT
Call Number: 
330.963 PRO 2004
Serial Key Title: 
Proceedings of the First International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
I
Publication date: 
2013-05-27 00:00:00
Forum or Discussion date: 
2013-02-27 00:00:00
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy