DEBREMARKOS UNIVERSITY

COLLEGE OF BUSINES AND ECONOMICS

DEPARTMENT OF ECONOMICS

Determinants of Urban Households’ Poverty in East Gojjam Zone of Amhara

Regional State.

A Research Proposal

By

Assefa Delesho (Principal investigator)

Tsegaw Kebede (Co-investigator)

September, 2020

Debre Markos, Ethiopia

 TABLE OF CONTENTS
Contents Page
LIST OF TABLES...................................................................................................iii
LIST OF FIGURES..................................................................................................iv
LIST OF ABBREVIATIONS....................................................................................v
ABSTRACT.............................................................................................................vi
1. INTRODUCTION...........................................................................................1
1.1. Background of the Study.............................................................................................................1
1.2. Statement of the Problem.............................................................................................................3
1.3. Research Objectives.....................................................................................................................6
1.3.1. General objective of the study..........................................................................................6
1.3.2. Specific objectives............................................................................................................7
1.4. Significance of the study..............................................................................................................7
1.5. Scope and Limitation of the Study...............................................................................................8
1.6. Organization of the Paper............................................................................................................8

2. LITERATURE REVIEW................................................................................9
2.1. Concepts and Definition..............................................................................................................9
2.2. Theoretical Review....................................................................................................................12
2.2.1. Setting poverty line.........................................................................................................12
2.2.2. Poverty Measurment.......................................................................................................12
2.3. Empirical Literature Review......................................................................................................16
2.4. Conceptual Framework..............................................................................................................17

3. Research Methodology..................................................................................21
3.1. Description of the Study Area....................................................................................................21
3.2. Research Design and Approach.................................................................................................22
3.3. Data Type and Source................................................................................................................23
3.4. Study population and sample frame...........................................................................................23
3.5. Sample Size Determination and Sampling Technique...............................................................23
3.6. Data Collection method and procedure......................................................................................24
3.7. Method of Data Analysis...........................................................................................................24

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3.7.1. Descriptive analysis........................................................................................................24
3.7.2. Econometric analysis......................................................................................................24
3.8. Quality of the Research..............................................................................................................37
3.9. Research Ethics..........................................................................................................................37
3.10. Expected Outcome of the Study.............................................................................................37

4. ACTIVITY PLAN AND BUDGET BREAKDOWN...................................38

4.1. Activity Plan..............................................................................................................................38
4.2. Budget Plan...............................................................................................................................39

5. REFERENCES...............................................................................................40

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 LIST OF TABLES
Table 1 Summery of MPI dimensions, indicators and their respective weight 30

Table 2 Summary of the study variables 36

Table 3 Activities and time budget 38

Table 4 Budget breakdown 39

Table 5 Budget Summary 39

iii
 LIST OF FIGURES

Figure1. Conceptual framework of the study 20

Figure 2. Map of east Gojjam zone 22

iv
 LIST OF ABBREVIATIONS

CBN Cost of Basic Needs

CSA Central Statistics Authority

EHNRI Ethiopian Health and Nutrition Research Institute

ETB Ethiopian Birr

FEI Food Energy Intake

MoFED Ministry of Finance and Economic Development

NGO Non Governmental Organazation

WB World Bank

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 ABSTRACT

Poverty is multifaceted concept. It has existed for a very long time, and to different extents it
remains to be a worldwide social evil still now in the 21st century. Poverty in Ethiopia is also a
longstanding problem affecting a significant portion of its rural and urban population. Thus,
elimination of poverty is one of the global challenges that ever faced mankind and provoked
global action exemplified by the millennium development goals. The main objective of this study
is to identify determinants of poverty in four municipal towns of east Gojjam zone, namely:
Debre Markos, Dejen, Bichena and Mota. The source of data will be primary data and a method
of data collection will be household survey. Multistage sampling techniques will be employed.
Firstly, four municipal towns will be taken purposively and secondly, urban household heads
will be selected randomly. Data will be collected using interview method. Binary logistic
regression and ordered logit regression model will be employed to identify the determinants of
poverty among urban households. Foster Greer Thorbeck method will be applied to estimate
income poverty status by using annual total expenditure. Alkire and Foster method will be
employed to measure multidimensional poverty status.

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 1. INTRODUCTION

1.1. Background of the Study

Poverty is multifaceted concept, such as hunger, lack of shelter, being sick and not being able
to see a doctor, not being able to go to school, not having a job, fear of the future, living
one day at a time. It is losing a child to illness brought about by unclean water. It is
powerlessness, lack of representation and freedom. It has many features; changing from
place to place and across time, and, has been described in many ways. It is the inability to retain
a minimal standard of living, measured in terms of basic consumption needs or some
income required for satisfying them (World Bank,2006).It has existed for a very long time, and
to different extents it remains to be a worldwide social evil still now in the 21st century (FAO,
2012). More than two thirds of the 1.4 billion people who live in extreme poverty reside in rural
areas of the developing countries (IFAD, 2011).

Ethiopia is one of the World’s poorest countries. Out of a population of around 80 million (2008)
people, 35 million people are living in abject poverty. In one of the world’s poorest countries,
where about 44 percent of the population lives under the poverty line, more than 12 million
people are chronically or at least periodically food insecure. Most of them live in rural areas with
agriculture as their main occupation. With 80% of Ethiopians dependent on agriculture as their
main livelihood, severe arid conditions due to persistent lack of rainfall coupled with civil
disputes have worsened Ethiopian poverty (World Bank, 2017). Poverty in Ethiopia is a
longstanding problem affecting a significant portion of its rural and urban population. Survey
results of HICES indicated that the proportion of population below poverty line in Ethiopia stood
at 30.4% in rural areas and 25.7% in urban areas in the 2010 fiscal year (MOFED, 2012).

Poverty disproportionately concentrates in sub-Saharan Africa (SSA); and SSA is the only part
of the world where poverty has increased in absolute terms. Ethiopia is among the poorest third
world countries in SSA countries with an annual average per capita income of US$116. Statistics
on Ethiopian poverty shows that about 44 percent of the total populations (45 percent in rural and
37 percent in urban areas) are found to be below poverty line, caring equivalent to 45 US cents
per day (MOFED, 2006). Ethiopia ranks 170/177 in Human Development Index (World Bank,
2004a). Ethiopia has a total population estimated at 75.1 million in mid July 2006 with a growth

1
rate of 2.62 percent per annum (approximately additional 2 million people per year) (World
Bank, 2004b). The overwhelming majority (84 percent) resides in rural areas where agriculture is
a predominant economic activity, infrastructure and social services are not well developed. Only
16% of the population is urban dwellers (CSA, 2006).

Elimination of poverty is one of the global challenges that ever faced mankind and provoked
global action exemplified by the millennium development goals. These challenges especially in
developing countries have become a prior problem to attain food security and self- sufficiency
for their citizens. Poverty reduction is possibly the ultimate goal of all development and by
implication development policy focusing attention on the poor could be contributing to both
growth and equity (Datt and Ravallion, 1992).

But, the MPI value of Ethiopia was 0.564 (HDR, 2013). Although there is a declining trend of
poverty both at regional and national levels, the highest food poverty was noted in Amhara
National Regional State with a head count index of 42.5% according to the regional statistical
figures of MOFED (2012). Rural and urban poverty head count index in the region stood at
30.7% and 29.2%, respectively in which the former was above the national head count index of
29.6% during the 2010/11 indicating that rural poverty was a widely spread problem in the
region leaving rural households still poor. But the urban poverty is also hidden poverty in the
region.

Ethiopian urbanization rate (16%) was lower than the sub-Saharan average of 30%. However,
recently due to high rural-urban migrations and population growth of nearly 3.8%, remarkable
urban expansions are observed. If managed proactively, the expansion of urban areas presents a
huge opportunity to shift the structure and location of economic activity from rural agriculture to
the larger and more diversified urban industrial and service sectors. However, poor management
and planning in urban Ethiopia results in rising unemployment, challenges in the provision of
infrastructures, services, and housing. Hence, low quality of life, low life expectancy, food
shortages and high incidence of poverty characterize most of the urban areas (World Bank,
2015).

The multi-dimensional character of poverty in Ethiopia was reflected in many respects, such as
destitution of assets, vulnerability and human development. The government had understood the

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multi-dimensional impacts of poverty and put poverty alleviation and reduction as major socio-
economic and political issue in the country. The existence of large number of poor people and
the prevalence of economic inequality may bring about social tensions which would induce
various criminal acts if situations go beyond the limits of social tolerance. Poverty alleviation
would, therefore, enhance economic development and result in improved incomes and better
well-being of the people which is a pre-requisite for peace and further development (Asmamaw
E. 2004).The relatively higher incidence of urban poverty in the urban requires identification of
the causes of poverty, highly poverty stricken part of the population and where actually most of
the urban poor located in. Doing so will ease the task of policy makers and development partners
of the country to efficiently target poor urban households using the appropriate mode of
interventions (Mohammed, 2017).

To have a meaningful intervention and assist the poor it requires identifying the root causes of
poverty in the urban specific context and need to measure poverty. Analyzing poverty in its
specific context using quantitative way informs and improves the relevance of intervention; in
addition it helps to monitor poverty situations as a base line for monitoring of interventions
impacts for specific area. Identification of factors of poverty could also help to distinguish the
intervention directions and inform policy options for tackling poverty by understanding
determinants of poverty from location specific context. In addition, it could improve the
information and knowledge gaps that were hampering in identifying and addressing the poor
appropriately in the implementation of development program/project. Therefore, this study tries
to assess the prevalence and identify determinants of urban poverty in the selected towns of east
Gojjam zone, Ethiopia.

1.2. Statement of the Problem

Poverty is one of the global challenges that ever faced mankind and provoked global action
exemplified by the millennium development goals. Poverty can be reduced in the presence of
strong institutions, and equitable distribution of resources. This requires good governance and a
non-corrupt government. However, in Africa, programs designed to fight poverty are not fully
implemented because the funds end up in the hands of corrupt individuals, who pocket the
majority. Again due to poor governance, those in authority have failed to apprehend the corrupt.
This creates an imbalance in society and leads to more poverty because it ends up with a few

3
influential and powerful individuals oppressing the poor majority. Another leading cause of
poverty in Africa is the prevalence of diseases (such as malaria, HIV/AIDS, TB,
EBOLA,COVID-19, etc) due partly to inadequate and poor health facilities. When a household is
affected by any of the diseases, the little resources are spent on treating the sick. In a worst case
scenario where the bread winner dies, those who are left behind have no resources to support
themselves, thus leading to poor lifestyles. The loans given out by the World Bank and IMF have
also contributed to the poverty in Africa. Such loans come with strict conditionality, which
usually require governments to adjust some of their economic decisions. For instance, the
requirement to reduce total government spending in African countries has affected major social
sectors such as education, health and infrastructure, which are drivers of economic development
(Alex Addae-Korankye, 2014).

In Ethiopia, poverty is the general feature of the nation causing many sufferings to the
largest proportion of the population. It is a serious agenda for the government, donor
agencies, NGOs and other actors to reduce the level and mitigate the effect and its
associated impacts on the wellbeing of the people. The Ethiopian government has been
formulating and implementing various policies and programs since 1991 that are in one-way
or another related with poverty reduction. Yet most efforts have been biased towards rural
areas (Tesfaye, 2006).

In east Gojjam zone urban poverty situation is very severe, as it is recognized from several
indicators of poverty like high unemployment level, poor sanitation system, inadequate pure
water supply, inadequate electric power supply, and low wage employment for daily laborers,
large percentage of population with low-income earning, inadequate health facilities, poor
infrastructural facilities (roads, networks and etc), poor housing services, and etc. In sum,
the entire above problems directly or indirectly have implications of urban poverty in the
towns (Debre Markos Urban Administration Office, 2017).

In the towns thousands of people exist in desperate poverty without access to adequate
shelter, clean water, education and health care and basic sanitation. The economic activity
and social infrastructure of the towns is low and the living standard of the inhabitants is
not in a good condition. This is due to excessive rural-urban migration, population

4
growth, limited infrastructure and technical skill, interruption of the electric power,
communication network and water supply. More of dwellers are engaged in occupation
which has limited returns. This include large number of the residents employed in civil
service, small scale industries (wood work and metal work) and in a number of petty
business of preparing and selling the traditional popular drink- tella, arekie and tej (East
Gojjam Zone Planning and Economic Development Office, 2016).

Poverty reduction is the most urgent task facing humanity.One of the challenges in the fight
against poverty is clear identification of the prevailing impediments. Identifying impeding
factors which aggravate poverty is vital. Among the many impediments of poverty are: the socio-
economic, demographic, institutional and environmental factors. Thus, identifying the effects of
these factors on poverty status is critical in the study of urban poverty since these factors take the
visible repercussions on the commendable life of urban dwellers. Towns in east Gojjam like
other towns of Ethiopia are currently facing daunting challenges of these factors. Based on this,
for the strategy formulation, it is important to understand who the poor are, where they live,
and what their source of livelihood is. A good understanding of the nature of poverty
enables a comprehensive exploration of poverty determinants.

The literature dealing with poverty in Ethiopia’s small towns is limited, reflecting the lack
of an appropriate and reliable household survey data that would allow the comparison of
welfare across time.To understand urban and rural poverty studies were conducted in many
big cities. Mekonnen (1996) conducted study on big towns of Ethiopia like Dire Dawa, Addis
Ababa, Hawassa, Bahir Dar, Mekelle and other regions.The analysis by Mekonnen (1996) on
these towns was limited to food poverty in recognition of the fact that satisfaction of basic food
requirements remains a major problem for poor households in Ethiopia. Tadese (1999) and
Tassew and Tekie (2002) also conducted a study on national poverty profile of Ethiopia. Study
on urban poverty in small towns particularly in east Gojjam was not conducted by using
quantitative methods of poverty assessment. The study of poverty on other regions reinforced
the same idea that a broad perspective on the problems of poverty allows us to examine
their multiple factors contributing to specific urban area poverty.

The objectives of most studies in the country were to measure the severity and intensity of

5
poverty at country level and do not well explain the social well-being dimensions of poverty in
the specific urban areas. The problems and determinants of poverty in different urban areas
and/or cultural settings will a l s o differ. This in turn create difficulty to understand clearly
and capture the process of getting poor, the way out of poverty in addition the effect of
individual household persist in poverty in the urbans. Therefore, conducting a research
by empirical methods help to understand and identify the determinants of poverty at
household level. It could also assist to have successful poverty reduction intervention by
targeting the poor. This could create opportunity for improving effective and efficient
utilization of resources of program/projects hence there is a need for specific urban poverty
studies.

Different research findings regarding to rural and urban poverty may also be due to definitional,
methodological and socio-economic differences of the respective study area. Even with the same
definitions of poverty different results may be obtained when different methodologies are used.
In addition, there is cultural component and social economic differences associated with work
habit in the previous study areas, and most of the studies are descriptive. This means that the
problem and determinant of poverty in different region and cultural setting will differ. These
indicate the need for region specific urban poverty study. Moreover, the issue of poverty may
differ from region to region and urban to urban which call for studying the situation for specific
regions separately rather than making generalization based on the study of few urban centers.

Therefore, this study attempts to examine the determinants of poverty in four municipal towns
of east Gojjam zone, Ethiopia. It is designed to address the following research questions (1) How
are the prevalence, gap and severity of households’ poverty in municipal towns of east Gojjam
zone? (2) What are the determinant factors of urban households’ uni-dimensional poverty status
in the study area? (3) What are the determinant factors of urban households’ multi-dimensional
poverty status in the study area?

1.3. Research Objectives

1.3.1. General objective of the study

The general objective of the study is to examine the determinants of urban households’ poverty
inmunicipal towns of east Gojjam zone .

6
 1.3.2. Specific objectives
i. To measure prevalence, incidence and severity of urban households’ poverty in
municipal towns of east Gojjam zone;
ii. To identify determinant factors of urban households’ uni-dimensional poverty
status in the study area;
iii. To identify determinant factors of urban households’ multi-dimensional poverty
status in the study area.

1.4. Significance of the study

The expansion of urban areas, if managed proactively, presents a huge opportunity to shift the
structure and location of economic activity from rural agriculture to the larger and more
diversified urban industrial and service sectors. However, poor management and planning in
urban Ethiopia results in rising unemployment, challenges in the provision of infrastructures,
services, and housing. Hence, low quality of life, low life expectancy, food shortages and high
incidence of poverty characterize most of the urban areas (World Bank, 2015).

Cognizing this, poverty reduction is considered as the most urgent task facing humanity. One of
the challenges in the fight against poverty is clear identification of the prevailing impediments.
Identifying impeding factors which aggravate poverty is vital. Among the many impediments of
poverty are: the socio-economic, demographic, institutional and environmental factors. Thus,
identifying the effects of these factors on poverty status is critical in the study of urban poverty
since these factors take the visible repercussions on the commendable life of urban dwellers.
Towns in east Gojjam zone like other towns of Ethiopia are currently facing daunting challenges
of these factors. Based on this, for the strategy formulation, it is important to understand who
the poor are, where they live, and what their source of livelihood is. A good understanding
of the nature of poverty enables a comprehensive exploration of poverty determinants.

Assessing the prevalence and identifying determinant factors of urban poverty in selected towns
in urban specific context will have some paramount importance. It helps to have a meaningful
intervention and assist the poor. Analyzing poverty in its specific context using quantitative
way informs and improves the relevance of intervention; in addition it helps to monitor poverty
situations as a base line for monitoring of interventions impacts for specific area. Identification
of factors of poverty could also help to distinguish the intervention directions and inform policy

7
options for tackling poverty by understanding determinants of poverty from location specific
context. In addition, it could improve the information and knowledge gaps that were hampering
in identifying and addressing the poor appropriately in the implementation of development
program/project.

Therefore, this study tries to assess the prevalence and identify determinants of urban poverty in
the four municipal towns of east Gojjam zone, Ethiopia and would give information for
government and non-governmental organizations or for any interested actors who in one or
another way are engaged in the development of the towns. This research will also serve as a
reference document for future studies.

1.5. Scope and Limitation of the Study

Conceptually, the study will assess the prevalence of poverty and identify determinant factors of
uni-and multi-dimensional poverty status in selected towns of east Gojjam zone. It will also
cover socio-economic, demographic, institutional and environmental determinant factors of
poverty. Spatially, it will be conducted on four selected municipal towns out of the twenty towns
of the zone. Methodologically, cross sectional household survey data will be analyzed using both
descriptive and econometric methods.

Any research is not complete and free from limitations. This study, therefore, will be constrained
as urban poverty is a function of multitude factors. That is, in this study, only variables, which
are assumed to affect urban poverty, will be included. The study believes that it could have been
much comprehensive had a number of areas and variables been included. The reason might be
due to resource limitation. Respondent households might also not give full information

1.6. Organization of the Paper

The research paper will be organized into five chapters. The first chapter w i l l present
introduction of the study which includes background of the study, statement of the
problem, objectives of the study, significance, scope and limitations of the study. The second
chapter will present review of theoritial and e m p i r i c a l literatures pertinent to objectives
of the study. Chapter three will present the research methodology. Chapter four will present
results and discussion. Finally, conclusion and policy implications will be drawn in chapter
five.

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 2. LITERATURE REVIEW

2.1. Concepts and Definition

Poverty: Poverty is "the inability to attain a minimum standard of living (World Bank, 1990).”
Lipton and Ravallion (1995) define that "poverty exists when one or more persons fall short of a
level of economic welfare deemed to constitute a reasonable minimum, either in absolute sense
or by the standards of a specific society." This makes us aware that definition of poverty includes
a given level of welfare. Then, it is important to study how to assess welfare as an indicator of
poverty.

In the literature there are three main schools of thought concerning the definition and
measurement of poverty: These are the welfares school; basic needs school, and capability
school (Yared 2005, Garza 2001). These schools although perceive poverty differently, there are
areas in which they share some common meaning, which is all of them judge a person to be poor
whenever she/he is lacking with respect to reasonable minimum standard.

The welfare school: The welfares school relates definition of poverty to the economic well-
being of the society. It assumes that when; societies are not able to attain a level of economic
well-being deemed to constitute a minimum by the standard of that society, and then
person/society faces poverty. It sees income as a determining factor for the presence of poverty
(Yared, 2005). It bases composition of wellbeing solely on individual utilities, which are based
on social preferences (Ravallion, 1993). Problems related to this school are the need to make
inter-personal utility comparisons to obtain welfare functions, the degree of validity of full
information and unbounded rationality on the part of consumers.

The Basic Needs School: This school defines poverty when one lacks basic needs (goods and
services). It concentrates on the degree of fulfillment of basic human needs in terms of nutrition/
food, health, shelter, education, transport and so on. Yared (2005) tried to explain the limitation
of basic needs approach as a definition and measure of poverty. He argues that the set of basic
goods and services is different for different individuals depending on age, sex, type of activity,
etc. of individual that is under consideration. One of the basic problems he cited is how to
determine the set of basic needs. There is even a high disagreement among professionals on the
determination of basic needs.

9
The Capability School: What is emphasized in this school is neither the economic well-being
nor the basic needs deemed to satisfy the minimum standard by the society; it is nevertheless,
human abilities or capabilities to achieve a set of functioning. This is an alternative criterion for
the definition and measurement of well-being which tells the extent to which people have
capabilities to be and to do things of intrinsic worth. Sen (1987) wrote that the "value of the
living standard lies in the living, and not in the possessing of commodities". Such an approach to
the definition and /or measurement of poverty suggests a broader set of criteria for assessing
poverty than just income and/or consumption. The measure is said to include publicly provided
but non-marketed services; like, sanitation, health care, education & life expectancy (Sallila and
Hilamo, 2004).

Sen (1983) introduced the notion of capabilities in poverty definition and assessments. He
defined poverty not only as a matter of low level of well-being, but also as lack of ability to
pursue well-being precisely because of lack of economic means. He favored the capability to
function as criteria for assessing standard of living, and by implication poverty rather than the
utility that might be derived from using that capability. However, the difficulties of this method
lie in the application of the concept of capabilities in practical poverty assessments. This school
assumes that if one is devoid of the right to participate and does not perform the functioning’s,
she/he is considered to be poor. It is said that it neither offered a practical criteria for evaluating
the various capabilities to function nor sought any aggregation of social values of separate
capabilities (Kingdon and Knight, 2004). Thus the availability of different definition of poverty
which is in turn a result of the multifaceted concept, had led to the availability of different
poverty line definitions.

Poverty Line: Absolute poverty is measured relative to a fixed standard of living; that is, an
income threshold that is constant across time. Absolute poverty measures are often used
to compare poverty between countries and then they are not just held constant over time, but
also across countries. The International Poverty Line is the best known poverty line for
measuring absolute poverty globally. Some countries also use absolute poverty measures on a
national level. These measures are anchored so that comparisons relative to a minimum
consumption or income level over time are possible (Max Roser and Esteban Ortiz-Ospina,
2013).

10
Relative Poverty, on the other hand, is measured relative to living standards in a particular
society, and varies both across time and between societies. The idea behind measuring poverty
in relative terms is that the degree of deprivation depends on the relevant reference group;
hence, people are typically considered poor by this standard if they have less income and
opportunities than other individuals living in the same society. In most cases, relative poverty
is measured with respect to a poverty line that is defined relative to the median income in the
corresponding country. This poverty line defines people as poor if their income is below a
certain fraction of the income of the person in the middle of the income distribution. Because
of this, relative poverty can be considered a metric of inequality-it measures the
distance between those in the middle and those at the bottom of the income distribution.
Relative poverty can be measured using the poverty headcount ratio and the poverty gap
index. Indeed, these indicators are common in Europe. However, it is important to bear in
mind that these are not comparable to the estimates published by the World Bank the
nature of the International Poverty Line is different (Max Roser and Esteban Ortiz-Ospina,
2013).

The method of defining subjective poverty line depends on the subjects themselves. The
procedure lets people to define poverty through their lived experience. Hence, the identification
of the "poor" and the "non-poor" is left to self-perception of the individual concerned. As
poverty in this sense refers to subjective well-being of individuals, the perceptions of people
towards their own situations is of vital importance in setting poverty threshold. Hence, the
method sets poverty line based on the relationship between survey responses on questions of
minimum income, considered by an individual to be adequate enough to get along with a
representative family size, and the actual income. The resulting definition is called the Leyden
poverty-line definition named after its place of origination. The point of interaction between the
minimal income stated to be adequate and the actual income in the graph is taken as the poverty
threshold (Saith, 2005)). The basic assumption that people associates roughly the same welfare
feeling to certain verbal qualifications like for instance "enough to get along" is what the
subjective method of defining poverty line depends on. On the basis of this assumption, income
levels, which provide a welfare level to households of different size and type, can be derived
(Hagenaars, 1986).

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2.2. Theoretical Review

2.2.1. Setting poverty line

Given the complexities of poverty concept and its definition, the fundamental question that
comes uppermost in the analysis of poverty is the derivation of poverty line. In the derivation of
poverty line scholars use different methods. Poverty line in simple term is a line that delineates
the poor from the non-poor. To do so construction of poverty line is an important issue.

The first step that needs to be clear in the analysis of poverty is to identify whether an individual
is poor or not to distinguish the poor from the non-poor. For this purpose, poverty line plays a
crucial role in quantifying the various indicators of well-being into a single index. Although the
choice of poverty line is always arbitrary (World Bank, 2000), the common argument is that
there is a minimum level of consumption of goods and services below which it is difficult to
sustain our life. Hence, in order to get the poverty line, it demands thorough work in that the
level and type of goods and services must be accurately identified. Although hot debate is on
how to exactly arrive at different levels of goods and services due to the presence of regional
price difference, various commodities and individuals preferences, it is tolerable that a carefully
examined work can give good estimation. After setting the poverty line the next step is the
measurement of poverty.

2.2.2. Poverty Measurment

2.2.2.1. Income poverty measuremnts

In the construction of income poverty lines two methods can be employed: the first is to directly
use current consumption of goods and services as an indicator of well-being. This requires
identification of the minimum bundles of goods and services, which an individual has to
consume. In this case, the bundle serves as a border line between the poor and non-poor. The
second method uses income as a parameter to identify an individual as poor or non-poor. This
necessitates specifying minimum income that enables an individual to achieve consumption of
minimum bundle of goods and services defined by the minimum socially acceptable level.
Various methods have been employed in constructing poverty lines. The most popular methods,
however, are the Cost of Basic Needs (CBN) and Food Energy Intake (FEI) (Mekonnen, 2002).

12
Cost of basic needs approach (CBN): To implement this method Ravallion and Bidani (1994)
employ two stages: First determining the food consumption bundle just adequate to meet the
required food energy requirements and second adding to this cost an allowance for non-food
needs. The food consumed is then valued at the prevailing price to obtain the food poverty line.
The allowance for basic non-food consumption is again anchored on the consumption pattern of
the poor. Two problems may arise. One is variation in estimating food components (minimum
required nutrition level) across regions and ethnic group. The second is estimating the non-food
components of the poverty line since there are no objective criteria on which to base the
satisfaction. In any case, the basic needs approach is the most widely used approach to setting
poverty line in developed countries.

Food energy intake approach (FEI): This approach locates the poverty line as the income or
consumption expenditure level just adequate to meet a predetermined food energy intake to an
individual. The level of FEI, very much, depends upon, preference, activity, age and sex of an
individual. After taking these differences into account and the costs of attaining predetermined
FEI, the poverty line can be constructed. This could be obtained by finding the consumption
expenditure or income level at which the person attains the food energy level (Ravallion and
Bidani, 1994). Most analysts argue that consumption will be a better indicator of well-being for
the following reasons. First, consumption is a better indicator of well-being due to the question
of access, and availability of goods and services apart from the issue of income needed to get
those goods and services. Second, consumption may be measured better than income. This is
especially true in cases of poor agrarian economies, as there is frequent income fluctuation
according to harvest cycle and the erratic flows of income as a result of large informal sectors in
urban economies of the developing countries. Consumption or expenditure may also better
reflect household’s actual standard of living and ability to meet basic needs. Thus, consumption
expenditures indicate not only command of goods and services but also access to credit markets
and savings in times of lower or even negative income level (Couldouel, et al, 2004). This does
not to mean that this approach is free from flaws.

However, the relative merits of using one methods of the poverty-lines over the others and the
vice versa is still debatable. Each has its own strengths and weaknesses. Some argue that the
poverty of the third world cannot be studied through poverty lines like in subjective criteria.

13
Those who support this argument cite the very low level of income and the subsistence nature of
economies in these countries as a major reason for the likely inaccurate results of such a
measurement. On the other hand, others argue that poverty cannot be meaningfully quantified in
excessively narrow and lean objective criteria (Mekonnen, 2002). The fact that the concept,
definition and setting of poverty lines are controversial invites one to look deep into how one can
measure poverty.

Direct Caloric Intake Method: The absolute poverty line is defined as the minimum calorie
requirement for continued existence. Individuals who consume below a prearranged minimum
calorie intake are estimated to be poor. Nevertheless, this approach does not report for the cost of
obtaining these calories and pay no attentions to non-food needs.

2.2.2.2. Measurements of multidimensional poverty

The one-dimensional measurement of poverty cannot measure poverty in more than one
indicator. Then who is poor and how overall poverty is measured when there are several
dimensions? Multidimensional measure of poverty is an approach to answer this question.
Alkire and Foster (2011) have developed a method to measure poverty among many dimensions
and indicators. Two bench mark identification approaches are used by Alkire and Foster (2011)
the union approach and intersection approach. Under union approach, a person deprived in any
dimension is considered as poor and under intersections approach a person is poor if he/she is
deprived in all dimensions. Both approaches are easy to understand, but difficult to separate the
poor from the non-poor. This method is an approach in between of the two and uses a dual
cutoff identification procedure. The method has three dimensions: health, education and
standard of living which are measured using ten indicators. Let we have data available in the
form of (n*d) data matrix Y for n persons and d ≥ 2 dimensions by assuming multi-dimensional
variables are selected.

Identification of the poor: In one-dimensional poverty analysis, the poor are identified using
the poverty line or threshold, with poor people being those whose resource falls below the
poverty line. In multidimensional poverty, where there are many dimensions, identification of
the poor is more challenging. The basic elements of identifying the poor using the dual cutoff
approach are discussed as follows.

14
Deprivation cutoffs: A vector Z = (Z1… Zd) of deprivation cutoffs (one for each dimension) is
used to determine whether a person is deprived or not. If the person’s achievement level in a
given dimension j falls short of the respective deprivation cutoff Z j, the person is said to be
deprived in that dimension; if the person’s level is at least as great as the deprivation cutoff, the
person is not deprived in that dimension.

Weights: A vector W = (W1,…,Wd) of weights or deprivation values is used to indicate the

relative importance of the different deprivations. If each deprivation is viewed as having equal
importance, then all weights are one and sum to the number of dimensions d. If deprivations are
viewed as having differential importance, this is reflected by a vector whose entries sum to d but
can vary from one, with higher weights indicating greater importance. Note that the deprivation
values affect identification as they determine the minimal combinations of deprivations that will
identify a person as being poor; they also affect aggregation by altering the relative contributions
of deprivations to overall poverty.

Deprivation Counts: A column vector C = (C1,…,Cn) of deprivation counts reflects the breadth
of each person’s deprivation. The ith person’s deprivation count Ci is the number of
deprivations experienced by i (in the case of equal weights) or the sum of the values of the
deprivations experienced by i (in the general case).

Poverty Cutoff: A poverty cutoff k is satisfying 0 < k ≤ d, used to determine whether a person
has sufficient deprivations to be considered poor. If the i th person’s deprivation count C falls
below k, the person is not considered to be poor; if the person’s deprivation count is k or above,
the person is identified as being poor. The title dual cutoff refers to the sequential use of
deprivation and poverty cutoffs to identify the poor. Note that when k is less than or equal to the
minimum weight across all dimensions we have union identification. When k=d, the intersection
approach is being used.

Identification Function: The identification function summarizes the outcome of the above
process and indicates whether a person is poor in Y given deprivation cutoffs z, weights w, and
poverty cutoff k. If the person is poor, the identification function takes on a value of one; if the
person is not poor, the identification function has a value of zero. One of the interesting
properties exhibited by our identification approach is that it is applicable even when one or

15
more of the variables are ordinal. All cardinalizations of the ordinal variable are found by
applying a monotonic transformation to the variable and its cutoff which yield identical
conclusions whether a person is deprived in the dimension and poor. This expands the potential
reach of the methodology by allowing it to be meaningfully applied to data with lower level
measurement properties. Multidimensional poverty analysis measures poverty with multiple
deprivations experienced simultaneously (Alkire and Foster, 2011). This method is sensitive to
the joint deprivation of people. Ii is a general framework for measuring multidimensional
poverty. The dimensions and weights could vary according to the context and evaluation
purpose. This makes the method flexible for researchers.

Measuring poverty status of a given country nationally, regionally and zonal level make the poor
on the agenda, able to target interventions and monitor and evaluate projects and policy
interventions those geared towards the poor. However, multidimensional poverty status of
household is not measured at zonal level as well as decomposed at rural and urban level
regionally. Thus the motives for doing this research is desire to be of service to society by
investigating factors affecting the uni and multidimensional poverty status of urban households
in East Gojjam zone.

2.3. Empirical Literature Review

The literature dealing with poverty in Ethiopia is limited, reflecting the lack of an
appropriate and reliable household survey data that would allow the comparison of welfare
across time. Since the early 1990’s, however, periodic household surveys have been
conducted that have facilitated the analysis of both urban and rural poverty. One of the
earliest attempts to examine urban poverty in Ethiopia was by Mekonnen (1996) using the
1994 Ethiopian Urban Household Survey (EUHS). The survey provided, among other things,
information on the demographic and consumption behavior of 1,500 households randomly
selected from seven urban centers of the country.The analysis by Mekonnen (1996) was
limited to food poverty in recognition of the fact that satisfaction of basic food requirements
remains a major problem for poor households in Ethiopia. Food poverty line estimates were
obtained in accordance with the food energy intake method,whereby total expenditure on food
is regressed on caloric consumption (Greer and Thorbecke1986). The findings confirm the
hypothesis that there is abject poverty in urban Ethiopia, with 39 percent of the urban

16
population living below the food poverty line.The analysis indicates that the highest incidence
of poverty was recorded for the city of Hwassa, followed by Addis Ababa,Mekelle, Dessie,
Jimma, Bahir dar and Drie dawa.

Mekonnen (1999) analysed the determinants and dynamics of urban poverty using the 1994,
1995 and 1997 rounds of the EUHS. The measure of welfare used in the study was consumption
per adult equivalent while the estimate of the poverty line was obtained following the cost of
basic needs approach. Thus, a consumption basket that would meet a minimum energy
requirement of 2200 kcal of energy per adult per day was constructed and its cost calculated
at region specific prices to obtain the food poverty line. The food poverty line was then scaled
up to obtain the total poverty line. This was done by dividing the food poverty line by the
average food budget share of households in the neighbourhood of the food poverty line. The
analysis in Mekonnen (1999) indicated an increase in poverty between 1994 and 1995 and
then a decrease from 1995 to 1997.

Tadesse (1999) concluded that price stabilization policies were important in abating poverty
as the observed fluctuations in the standard of living were mainly triggered by movements in
prices, especially that of grains. Such a policy prescription should be treated cautiously as
attempts to stabilize prices may create market distortions. Tadesse (1999) also advocated
human capital development and family planning programs as instruments to fightagainst
poverty.

Tassew and Tekie (2002) conducted a study on national poverty profile of Ethiopia and found
that poverty incidence, depth and severity being higher for those engaged in farming than those
engaged in non-farming activities; poverty incidence, depth and severity are higher for the
illiterate than for the literate in both rural and urban areas; the consumption poverty incidence,
depth, and severity sharply declines in accordance with the households’ level of education; and
the incidence, depth and severity of poverty increases with the increase in family size.

2.4. Conceptual Framework

A lot of scholars have been busy finding the tangible concept of poverty and agreed that it has
various angles in different professionals. It has also various interpretations in economic, social,
political, institutional, environmental and cultural contexts. Because of its variation in different

17
scholars, disciplines and interpretation various approaches have been employed to understand the
concept of poverty.

The biological approach, for instance, conceptualizes poverty as the lack of entities for survival.
It postulates that poverty exists when the necessary minimum requirements for physical
efficiency are not fulfilled. These, as most literatures, agree include lack of sufficient food,
clothing and housing (Sen, 1981). This approach gives more attention to the starvation issue and
does not care so much about the additional requirements, which an individual should get.

The normative approach, on the other hand, conceptualizes poverty based on value judgments
about the minimum adequate level of welfare below which one is said to be poor. The problem
which might arise at this juncture is what constitutes value judgments and how can one define
the minimum adequate level of welfare. This is, perhaps, owing to subjectivity and individual
differences among the different citizen's understandings. Value judgments can differ in many
respects among which the norms and values are the two as stated by Sen (1987).

Todaro and Smith (2003), renewed development economics and draw the inequality approach to
conceptualize poverty based on observable phenomena. They differentiate the economic gap
between the rich and poor as to how poverty operates in a given society and how one can
conceptualize it. Based on this, they attempted to look at the nature and the size of the
differences between the bottom 20 or 10% and the rest of the society. To remedy the problem,
distribution from the rich to the poor can make substantial development on poverty in most
society, however, important to note that poverty and inequality are distinct concepts and neither
subsumes the other though they share close meanings.

The sociological approach takes the concept of poverty as a reflection of social inequality. In a
social context Trufat (1994) explained poverty as absence of access to enjoy fundamental human
rights. This could include lack of access in social participations such as social class and social
group and so forth. In the eye of environmentalists, poverty is conceived as a situation in which
one has access to environmentally fragile natural resources that reduce income and increase one's
own ability while the economist identifies it as a situation in which the individual's command on
resources falls below a certain level. A political scientist conceptualizes poverty as lack of
participation/representativeness in politics or vote in presidential election. An anthropologist,

18
likewise, understands poverty when an individual or a society is deprived of practicing the
norms, values and cultures within the society.

Not only the concept of poverty varies across different disciplines or to professions, it moreover,
varies from country to country and time to time. Chronic and mass poverty, are too often, used to
characterize poverty of developing countries. Chronic poverty is a term used to denote the state
of being poor and failure to move out of it for a long period of time (Lipton and Ravallion,
1995). In fact, a family without basic needs of survival, low quality of land, productivity asset
(rural area) and low access to education, health, sanitation, recreation (in urban areas) is
identified with chronic poverty.

Poverty in developing countries, like Ethiopia, is too often conceptualized as mass poverty
implying a situation where more than half of the total population of the country lives in poverty.
Its concept in rural and urban areas, though have some common sharing, surly, have different
meanings. Different scholars came up with different conceptualization of poverty. For instance,
Grieson (1973) conceptualizes poverty and specifically urban poverty as a low quality in
healthcare, housing, calorie intake, clothing, recreation, education, entertainment, furniture
transportation, political representation and justice.

Meron (2002) conceptualizes poverty using the livelihood approach. This approach to urban
poverty refers to the ensemble of activities that a household or an individual regularly undertakes
and entitlements it makes claims in order to sustain a given standard of living. This captures not
only the measurable income, which most literatures suggest, but also about types of capital or
assets up on which livelihoods are built and households and individuals strive to acquire in order
to achieve requisite outcomes. The assets encompass physical capital, the basic infrastructure and
producer goods needed to support livelihoods. This approach takes financial capital, the
availability of cash or equivalent, human capital, the skills, knowledge, good health, natural
resource stocks, social capital/networks/connectedness, institutions and values as necessary
ingredients in identifying the presence of urban poverty. If the concept of poverty is, therefore,
multidimensional and no consensuses have been reached, then it goes without saying that its
definition is complex, a matter that needs rigorous task to comprehend.

19
Based on literatures, it is understood that poverty has many dimensions and facets and different
authors and researchers analyzed poverty in different ways and there is no universal rule of
thumb for conceptualizing poverty. Whatever its concept is on the basis of the theoretical and
empirical literatures reviewed, it is perceived that poverty is influenced by various factors. A
conceptual framework is a model presentation where a researcher represents the relationships
between variables in the study and shows the relationship graphically or diagrammatically. A
well designed conceptual framework helps as guide to effectively conduct the research and it is
an analytical tool with several variations and contexts. It uses to make conceptual distinctions
and organize ideas. To align the conceptual framework with this research objective, poverty
status is the dependent variable whereas the determinants of poverty condensed as demographic,
economic, social, institutional and environmental are independent variables. Conceptual frame
work can be either graphic or narrative and the diagram below shows the relationship between
determinants of poverty (Independent variables).and poverty status as measured by uni-and
multidimensional indicators (dependent variable).

Independent Variables Dependent Variable

 Determinants of  Poverty Status
Poverty:  One dimensional given by:
Consumption expenditure
 Demographic
 Multidimensional given by:
 Economic
Education, health, and living
 Social
standard
 Institutional
 Environmental factors

Figure1. Conceptual framework of the study

Source: Adapted from literature

20
 3. Research Methodology

3.1. Description of the Study Area

The study area covers four municipal towns in east Gojjam zone of Amhara region, Ethiopia,
namely, Debre Markos, Dejen and Bichena and Mota. East Gojjam zone is one of 10 zones
which are found in Amahara regional state. It shares borders with south Gondar to the north,
southWollo zone and Oromia region to the south, west Gojjam to the west. The zone has total
land area coverage of 14,009.74 kilometer square. The zone occupies 16 rural and 4 municipal
cities and its capital seat is called Debre Markos which is located 295 kilometers far from Addis
Ababa and 265 kilometers far from Amahara regional state Bahir Dar.

East Gojjam zone is situated with altitude ranged from 800 meter to 4070 meter. The climatic
conditions of the zone include 11.90 Dega, 80.55 % Woyina dega, 5.45% Kola and the rest 2.1
% covers Wurch climatic zone. Its annual rain fall distribution ranges between 900mm-1800mm
(East Gojjam Zone Adminstratin, 2016). It has a total of 2,613,835 peoples among which
1,292,047 male and 1,321,788 female. From these total populations 2,241,571 are rural dwellers
of these 1,104,963 are male and the remaining 1,136,608are female. Of these total 372,264 are
urban dweller of these 187,085 are male and185, 179 are female urban dweller (CSA, 2017).
The economy of East Gojjam zone is predominantly agricultural based where by 84 % of the
inhabitants depend on agriculture for their livelihood. Major crops grow in the zone are; Teff,
Wheat, Sorghum, Barley, Chick Pea, Veich, and Maize etc.

21
Figure 2. Map of east Gojjam zone

3.2. Research Design and Approach

Research approaches can be quantitative, qualitative or mixed type. The choice of research
approach is matter of characteristics of the problem under investigation. Basically quantitative
research is undertaken based on the measurement of quantity or amount. It is applicable to
phenomena that can be expressed in terms of quantity. It can also generate statistics through the
use of large scale survey research, using methods such as questionnaires or structured interviews.
(Kothari, 2004). A research design is the arrangement of conditions for collection and analysis of
data in a manner that aims to combine relevance to the research purpose with economy in
procedure. The type of research design is both descriptive researches whose main purpose is to
describe what is prevalent with respect to the problem under investigation (Kothari, 2004) and to
inferre the relationship between variables. Thus, this study will employ cross sectional survey to
asses determinants of urban poverty. To this end, the study will use quantitative research
approach and will follow both descriptive and econometric method of analysis.

22
3.3. Data Type and Source
The study employs cross sectional survey to asses determinants of urban poverty. Primary and
secondary data sources will be employed for this study. Both quantitative and qualitative data
will also be gathered. Primary data will be gathered from urban households. Secondary data will
be collected from various sources such as reports, research centers, CSA, urbans
administrative offices, internet and other published and unpublished materials, which will be
found to be relevant to the study.

3.4. Study population and sample frame

The first step in developing any sample design is to clearly define the set of objects, technically
called the population to be studied. For this study, the total number of urban household heads in
east Gojjam zone on which information about uni and multidimensional poverty status and
determinates will be desired. The population is finite since it consists of urban household heads
in east Gojjam zone. Sampling frame is the source list from which the sample is drawn so that
list of urban households in each kebele can be taken as a sampling frame for this study to
determine the sample size. A decision has to be taken concerning a sampling unit before
selecting sample. Sampling unit may be a geographical such as state, district, village, etc., or a
construction unit such as house, or it may be a social unit such as family, household, club,
school, etc., or it may be an individual (Kothari, 2004). Based on this, the study decides to use
towns and urban households as units of analysis for this study. The household is chosen as the
unit of analysis since data on most indicators is only available at the household level.

3.5. Sample Size Determination and Sampling Technique

Sample size refers to the number of items to be selected from the population reference to
constitute a sample. An optimum sample is one which fulfills the requirements of efficiency,
representativeness, reliability and flexibility. In most of the research work and surveys, the usual
approach happens to make generalizations or to draw inferences based on samples about the
parameters of population from which the samples are taken. The sample size of households will
be determined using mathematical formula developed by Yamane (1967).

N
n¿
1+ N (e)2

Where, n = representative sample size

23
N = total population

e = the desired level of precision

The study will employ multi-stage sampling method. Firstly, four municipal cities out of twenty
towns in the zone will be selected purposively, namely: Debre Markos, Dejen, Bichena and
Mota. Secondly, four kebeles, one kebele from each town will also be selected randomly.
Thirdly, a random sampling technique will be applied to select the representative sample
respondents or households. The sample size in each kebele will be taken proportional to total
population in each kebele. The random sampling technique will allow each household to have
equal chance to be selected.

3.6. Data Collection method and procedure

Quantitative data will be collected through structured questionnaire using interview method of
data collection. The structured questionnaires will be posed to the heads of the urban households.
Primary data will be collected on demographic, socio-economic, institutional and
environmental factors. Data collection will include average monthly household expenditure,
family size, housing condition, fuel types and sources used for cooking, and other variables
expected to determine urban poverty in the study area.

3.7. Method of Data Analysis

3.7.1. Descriptive analysis

The data will be analyzed using descriptive statistics such as poverty index, mean,
percentage,table, etc. Three indices can be utilized in the measurement of poverty. There are, of
course, various types of poverty indices but the most commonly known ones are head count
index (Po), poverty gap/depth index (P1) and the severity index (P2).

3.7.2. Econometric analysis

Econometrics analysis more specifically, logit and ordered logit model will be adapted.
Variables, which play significant roles for the incidence of poverty in towns, will be analyzed
using these models. Sata software will be employed to determine the coefficients of the
determinants: odds, odds ratio, and marginal effects and test the statistical significance
relationships between the determinants and the dependent variable, in this case urban poverty
status``.

24
 3.7.2.1. Description of model variables and hypothesis
Dependent variable and its measurement: It is a variable which is determined or influenced by
one or more independent variables (Gujarati, D.N., & Porter, D.C.2009). The dependent variable
for this study is poverty status of urban households which is taken as a dummy variable for
income poverty and ordinal scale of measurement for multidimensional poverty status. For
income poverty the dependent variable is urban households’ poverty status which is dummy and
takes 1 if the household is poor and 0 otherwise. For multidimensional poverty the study will
order the poverty status of urban households as severely poor (MPI greater than 0.50),
moderately poor (between 0.33 and 0.50), poor (equal to 0.33), vulnerable for poverty (between
0.20 and 0.33) and non-poor(less than 0.20) as Polychotomous responses.

To measure the income poverty status of rural households the study will follow cost of basic
need approach by applying the following steps.

Step 1. Calculate average household size.

Step 2. Find the minimum requirements of daily per capital calories 2,200 kilo calories per day.
Step 3. Find the typical food bundle of the relative poor household in urban area of east Gojjam
zone.
Step 4. Calculate the calorie of this bundle.
Step 5. Determine the cost of this food bundle as follows;
ZF= (WHO minimum calories requirement X Cost of the average food bundle at local price).
Step 6. Find the typical household on the food poverty line.
Step 7. To calculate the absolute poverty line of non-food item by: Si= α+β log (TEXP/ZN)i +ε
Where Si= (FXP/TEXP)
TEXP = Total expenditure per adult equivalence
FXP =Food expenditure per adult equivalence and
ZF= Food poverty line.
α and β are food share and slope, respectively.
i is the sampling unit which runs from 1 to n.
ZN=ZF (1-α)
Z=ZF+ZN.

25
Finally, the summary measure of the extent of poverty will be estimated by using Foster-Greer-
Thorbecke poverty indices. The most popular method of poverty measurement have used the
nutritional norm and defined poverty in terms of minimum calorie requirements (Dandekar and
Rath, 1971; Ercelawn, 1991; Greer and Thorbecke, 1986; Ahmed et .al., 1991).
The general formula to Measure monetary poverty status of urban households will be given as;

, α ≥ 0 for yi≤ z

Where Z is poverty line, yi is expenditure of individual i (adult equivalence),K number of poor

peoples , α is degree of aversion to inequality among the poor and N total number of population .

Head count index (α=0) or Incidence: It gives facts about the number of poor or incidence of
poverty within a given country.

(Po):
Poverty Gap Index (α=1) or average depth: It measures the extent or average distance of the
poor household fall below poverty line as proportion of the poverty line. It gives better ideal
about the depth of poverty.

Squared poverty Gap or Individual depth (Foster Green Thorbeck (FGT ): It measures the
severity of poverty as the poorest households are given a gerater weight in the equation it
measures the size of poverty gap and income ineqaulity among the poor .

To measure the multidimensional poverty status of urban households the study will use the
global MPI indices by using the cross dimensional poverty cutoff of one-third, identifying each
person as poor, if their weighted deprivations sum to one-third or more, severe poverty (the
percentage of people deprived in at least half of the weighted indicators) and vulnerability (the
proportion of people deprived in 20 to 33 percent of weighted indicators) (OPHI, 2018). The
MPI uses information from 12 indicators that are categorized in three dimensions: health,

26
education and living standards, and which identify each person’s poverty status depending upon
the joint achievements of household members.

Each towns’ MPI will be created by adapting (or using forms of) the method upon which the
MPI is based to better address local realities, needs and the data available from each household
in each town (these measures use the Alkire-Foster method ).The poverty status of each urban
household will be measured by using three dimension and ten multidimensional poverty
indicators adopted from Alkire, Sabina and Foster, James (2007) later modified by Oxford
Poverty and Human Development Initiative (OPHI) in customized way in the year 2017 .The
study aligned the dimensional and indicators of MPI to the Sustainable Development Goals of
Ethiopia. Associated with each indicator is a minimum level of satisfaction, which is based on
international consensus (such as the sustainable Development Goals or SDGs of Ethiopia). This
minimum level of satisfaction is called a deprivation cut-off. Sen’s argument supported by
Alkire and Santos (2010) thought that the choice of relevant functioning and capabilities for any
poverty measure is a value judgment rather than a technical exercise on the choice of dimension
and indicators of poverty. Finally, the study will compute the following basic multidimensional
poverty status indicators of urban households.

Headcount ratio (H):- It is the proportion of multidimensional poor people in the population

which is equal to , where q is the number of people who are multidimensional poor and n is
the total population.

Intensity of poverty (A):- It reflects the average proportion of the weighted component
indicators in which multidimensional poor people are deprived. For multidimensional poor
people only (those with a deprivation score c greater than or equal to 33.3 percent), the
deprivation scores are summed and divided by the total number of multidimensional poor people.

A= , where Ci is the deprivation score that the ith multidimensional poor person
experiences. The deprivation score Ci of the ith multidimensional poor person can be expressed as
the sum of the weights associated with each indicator j (j =1, 2... 10 in which person i is
deprived, Ci = Ci1 + Ci2… + Ci10.

27
Multidimensional poverty indicator (MPI):- The MPI value is the product of two measures:
the multidimensional poverty headcount ratio and the intensity of poverty:

MPI = H x A

The contribution of dimension d to multidimensional poverty can be expressed as;

Contribution of deprivation (d) = /MPI, where d is health, education or

standard of living. The following steps will be followed to measure MPI.

Step 1: Each household is assessed to determine if it is below the deprivation cut off in each
indicator. Households below the cut off are considered deprived in that indicator.

Step 2: The deprivation of each household is weighted by the indicator’s weight (an explanation
on weighting can be found in Table 1). If the sum of the weighted deprivations is 33 per cent or
more of possible deprivations, all household members are considered to be multidimensional
poor (OPHI, 2017). MPI consists of three dimensions for this study which weight an equal
weight. The three dimensions consist of 12 indicators as follows;

Education Dimension:-The local MPI uses two indicators that complement each other within
the education dimension for this study: One looks at completed years of schooling of household
members, the other at whether children are attending school. Years of schooling acts as a proxy
for the level of knowledge and understanding of household members. It is argued that both years
of schooling and school attendance are imperfect proxies. They do not capture the quality of
schooling, the level of knowledge attained or skills. Yet both are robust indicators, are widely
available, and provide the closest feasible approximation to levels of education for household
members (OPHI, 2011). Ethiopia has SDG (Sustainable Development Goal) with a target of
ensuring that, by 2030, children everywhere, boys and girls alike, will be able to complete a full
course of primary schooling.

Health Dimension: - The MPI uses four indicators such as Nutrition, child mortality, maternal
health deprivation, and maternal mortality for this study. The first indicator looks at nutrition of
household members. For children, malnutrition can have life-long effects in terms of cognitive
and physical development. Adults or children who are malnourished are also susceptible to other

28
health disorders; they are less able to learn and to concentrate and may not perform as well at
work so that for nutrition the study will use 2100 calorie per day per person food energy
requirements (POHI, 2011). Ethiopia has target by 2030, end all forms of malnutrition, including
achieving, by 2025, the internationally agreed targets on stunting and wasting in children less
than 5 years of age, and address the nutritional needs of adolescent girls, pregnant and lactating
women and older persons.

The second indicator uses data on child mortality mostly; child deaths are preventable, being
caused by infectious disease, diarrhea and child malnutrition (OPHI, 2011). Ethiopia has a target
by 2030, end preventable deaths of newborns and children under 5 years of age, with all
countries aiming to reduce neonatal mortality to at least as low as 12 per 1,000 live births and
under 5 mortality to at least as low as 25 per 1,000 live births.

The third indicator uses data on maternal health it is believed that mothers should deliver their
children’s with the help of health personnel (midwifery, doctors etc) in health service delivery
organization like Health station. Ethiopia has a target by 2030, ensure universal access to sexual
and reproductive health care services, including for family planning, information and education,
and the integration of reproductive health into national strategies and programmes.

The fourth indicator uses maternal mortality Ethiopia has a target by 2030 to reduce maternal
mortality ratio to less than 70 per 100,000 live births.

Standard of living Dimension:-The MPI considers six indicators for standards of living. It
includes three standard SDG indicators that are related to health (goal 3 states that ensure healthy
lives and promote wellbeing for all at all ages) and living standards, and which particularly
affect women: clean drinking water (goal 6 states that ensure availability and sustainable
management of water and sanitation for all), improved sanitation express in goal six, and the use
of clean cooking fuel .The SDG of Ethiopia has a target to ensure access to affordable, reliable,
sustainable and modern energy for all. It also includes two non-SDG indicators: electricity and
flooring material i.e .both of these provide some rudimentary indication of the quality of housing
for the household. Another indicator covers the ownership of some consumer goods, each of
which has a literature surrounding them: radio, TV, telephone, computer, animal cart, bicycle,
motor cycle, refrigerator, and does not own a car or truck.

29
30
 Table 1: Summery of MPI dimensions, indicators and their respective weight.

Dimension Indicator Deprived if … Relative

Weight
Health Nutrition Any adult having food calorie intake less than 2100 kilo 1/12
(1/3) calories per day.
Maternal health If births are not attended by skilled health personnel 1/12
Maternal mortality If Mother is died cause related to or aggravated by 1/12
pregnancy or its management (excluding accidental or
incidental causes) with in the household.
Child mortality Any child has died in the family in the five-year period 1/12
preceding the survey.
Education Year of schooling Any household member age 15 and above has not 1/6
(1/3) completed 8 year schooling.
School attendance Any school age child (compulsory school age 6-14) is not 1/6
or enrollment attending school (Adapted from FDRE, 2009).
Living Cooking fuel The household cooks with dung, wood, charcoal or coal. 1/18
standard
Sanitation The household’s sanitation facility is not improved 1/18
(1/3)
(according to SDG guidelines).
Drinking water If a household uses pond, stream or river, spring, or well 1/18
the household is have access for safe drinking water is a
30 minute or longer walk from home, round trip.

Electricity The household has no electricity for light (bio gas, solar 1/18
energy).
Housing At least one of the three housing materials for roof, walls 1/18
and floor are inadequate: the floor is of natural materials
(sar roof) and walls are of natural or rudimentary
materials like mud. Household has mud, wood, thatch
(sar) roof.
Asset The household does not own more than one of these 1/18
assets: radio, TV, telephone, animal cart, not own all farm
tools (hoe, plough, sickle or shovel/spade).
Adapted from OPHI, 2018
Independentvariables and their measurments: It is a variable or factors that cause or
influence another phenomenon or dependent variable (Gujarati, D.N., & Porter, D.C. 2009;
Verbeek, M., 2004). Based on different literature reviewed and economic theories the following
factors will possibly determine poverty status of urban households. The independent/explanatory
variables will be socio-economic, demographic, institutional and environmental determinant

31
factors of urban poverty. The measurements and expected effect of explanatory
variables on the dependent variable is hypothesized as follows.

Household Head Sex (HHS): It is widely believed that the sex of the household
headmeasured as dummy variable significantly influences household poverty, and more
specifically, the households headed by women are poorer than those headed by men. Thus
for this study female headed HHs is hypothesized to be positively related with the likelihood
of being poor.

Household Head Age (HHA): This refers to the age of the head of the household measured in
years. It is hypothesized that young head of a household could generate income for the family
by participating in employment generating scheme than the old age. Thus old aged head of
family could possibly be trapped in to poverty because of not participating in
employment generating scheme. Therefore, age is hypothesized to be posetively related with
the likelihood of being poor.

Household head marital status (HHMS): if household head is married they have better
opportunities in economy than those divorced and widowed. This variable is categorical and
will negatively affect the level of poverty status.

Household Head Education (HHE): Education in this study is continuous variable to

be measured in years of schooling. Households with more education are expected to
have an advantage in searching of information and getting jobs. Therefore education is
hypothesized to negatively affect the poor.

Household Head Income (HHI): This refers to the amount of income earned in Birr from
different type of activities. In reality a household who earn less income is more likely to be
poor. And hence, this variable is hypothesized to be negatively related with the likelihood of
being poor.

Household Head Occupation (HHOC): This refers to the type of occupation that the
household head is engaged in and to be measured as a categorical variable. If the
household head is self employee and Government/NGO employee they will earn more and can
lead their life to the better than those laborer and pensioner. Therefore occupation will

32
posetively affect the level of poverty status.

Household Size (HHS): This is the number of regular household members that live under
the same roof. Large and extended family size may affect the household income
negatively; which could affect and determines the level of poverty in relative ways because
of imbalance between production and consumption. According to Hilina (2005) households
with bigger family size are more likely to be poor than household with relatively small
family size. Therefore, family size is hypothesized to be positively related to HH poverty
status.

Household Health (HHH): household head with sick household member will be in worse
than those with a healthy ones in any dimensions of life. The more frequently the household
member gets sick and it is possible to have higher expense for medication. Therefore, this
dummy variable will be posetively related with household poverty status.

Household House Ownership (HHO): It is hypothesized that households without their own
house may face social and economic problem. Therefore, household house possssion to be
measured as dummy variable will negatively affect the level of poverty status.

Household water ownership (HHW): household who does not have private tap water in
their compound is more likely to be poor than who have, and this dummyvariable is
negatively related with poverty status.

Household source of energy/electricity (HHE): There is a striking difference in the

percentage of the population with access to electricity as a lighting source across the urban
spectrum. Access to electricity is mainly an issue of overall availability. The researcher may
expect that this dummy independant variable may affect negatively the dependant
variable.

Dependency ratio (DR): It is measured by the ratio of people of age 14 and below plus above
65 divided by people above age of 14 plus below age of 65. It is hypothesized to affect poverty
status of households negatively.

33
Amount of Credit Obtained (ACO): It is continues variable which can be measured in terms
of Birr. It is expected to affect the poverty status of households positively.

3.7.2.2. Model specification

Modeling depends on type of outcome variable, for categorical outcome variables, logistic
regression is usually used to examine possible relationship. The nature of dependent variable is
dichotomous (binary). Hence, to examine determinates of income poverty status of urban
households the study will use logistic regression model. Logistic regression has a binary
dependent variable and is often used to explain why some people are poor and others are not
.This responses arise when the poverty status of urban household is income poor or non- poor
based on their expenditure made for fulfillments of basic necessities for life to be computed by
the study. The binary responses will be coded 1 for poor households and zero otherwise.
The general logistic regression model with multiple covariates (Xi) will be estimated as follows;

Y= α+β1X1+β2X2…………+βnXn……………………………………………………………. (1)

The probability of the household being poor will be given as;

=……………………………………………………
……...…………. (2)

The probability of the household being non -poor will be given by;

………………………………………………………
………….………. (3)

The average marginal effect of a given explanatory variable, X i, on the probability of a

household to be above poverty line is given by;

…………………………………………
…………………………. (4)

To investigate determinates of multidimensional poverty status of rural households in the study

area the study will use ordered logit model. It is believed that some discrete outcome can be

34
ordered to elicit more robust and representative information about the subject under
consideration and it can be coded from the highest to the lowest rating (Afee Sallsu, 2017).
Based on this the study will order the poverty status of urban households as severely poor (MPI
greater than 0.50), moderately poor (between 0.33 and 0.50), poor (equal to 0.33), vulnerable for
poverty (between 0.20 and 0.33) and non-poor(less than 0.20) as Polychotomous responses.
Thus, the appropriate models for analysis in such a situation are the logit and probit models
which is argued by Afee Sallsu,( 2017). The order of poverty status is adapted from OPHI cut
off, ( 2017).
To estimate the model there is a latent continuous metric defined as y* underlying the observed
responses by the analyst i.e y* is unobserved variable that the study knows it, when it cross the
thresholds. If the study is modeling the predictor of multidimensional poverty status; once y*
cross a certain value, it reports severely poor, moderately poor, poor, vulnerable for poverty and
none poor status of urban households.
The latent variable model is given as;

…………………………………………………….…… (1)
The probability that observation i will select alternative j is

………………………...…………………………… (2)
For the ordered logit, F is the cumulative distribution function (cdf) which can be written as;
F(y)=ey/1+ey……………………………………………………………………………..………
(3)An illustration yi = (5, 4, 3, 2, 1) for (severely poor, moderately poor, poor, vulnerable for
poverty and none poor).
Choice rule by the study will be done by

…………………...…………………………………………...……... (4)
Using the generic representation, the respective probabilities for the five categories are derived
as;

35
………………………………………..……………. (5)

36
Table 2: Summary of the study variables

Variables Code Variabletype Measurment

Dependent variable
Income poverty status IPOS Dummy 1 = if household is poor
0 = otherwise
Multidimensional poverty MPOS Ordered 1= Severely poor (MPI greater than 0.50),
status categorical 2 = moderately poor (between 0.33 and
0.50), 3= poor (equal to 0.33), 4 =
vulnerable for poverty (between 0.20 and
0.33) and 5 = non-poor(less than 0.20)
Explanatory variables
Household head age HHA Continuous Age of the household in number of years.

Household head sex HHS Dummy 1 = if the household head is female , 0

= otherwise
Household size HHFS Continuous Number of persons in the household
Household head HHMS Dummy 1 = if the household is not
marital status currently with spouse, 0 = otherwise
Household HHE Continuous Education level of the head in years of
head schooling
education
Household HHOC dummy 1 = if the hosehold did not work under self
head employed,gov.t employees NGO
occupation employees ,0 = other wise
Household water HHW Dummy 1 = if the household had no private
own piped water, 0 = otherwise
Household health status HHH Dummy 1= household with frequent patient
member, 0 = otherwise
Household HHPI Continuous Total amounts annual income earned in birr
per capital
income
Household electricity HHE Dummy 1= if the household had no his own
metro electric, 0 = otherwise
Amount of Credit Obtained ACO Continuous Amount of cewdit obtained in birr

Dependency ratio DR Ratio Ratio of dependent to independent

persons in the household
Household House HHO Dummy 1= households without their own house 0
Ownership = otherwise

37
3.8. Quality of the Research
To assure quality of the data all research team members will administer the questionnaires properly. One
day careful training for enumerators will be given. Before the actual data collection work, data collectors
will carry out role play practices and then fill pretest on 12 respondents. At the end of every data
collection day, each questionnaire will be checked up for completeness and uniformity by the supervisors
and the principal investigator, and relevant feedback will be given to the data collectors and supervisors.
A goodness of fit statistical measure is a summary statistic indicating the accuracy with which the model
approximates the observed data. Contrary to the linear regression model, there is no single measure for
the goodness of fit in binary choice models and a variety of measures exists (Verbeek, M., 2004). Based
on this, Hosmer-Lemeshow goodness of fit statistic will be used to check accuracy of the model.

3.9. Research Ethics

Initially, a formal letter will be written from Debre Markos University Research and Community Service
Directorate which will be submitted to east Gojjam zone so as to get permission to conduct the study.
Then after, getting letter of permission, the researchers will inform each municipals as well as each kebele
administration chair -person about the objective of the study. They will also inform that the data obtained
from the urban households will be kept confidential and not be used for other than purpose of the study.

3.10. Expected Outcome of the Study

The findings of this study are intended to provide information on household poverty status and to gage
program efficiency and guide their policy in a quickly evolving economic environment. It could be
quality of life experience for urban households by enhancing socio-economic circumstances and social
interactions. The study will produce major findings on prevalence and determinant factors of poverty of
urban households in the study area. The study will provide evidence on the domains that have a high
contribution towards poverty among urban households. The findings of this study will be disseminated in
different ways. Primarily the finding of the study will be reported to Debre Markos University Research
and Technology Transfer Directorate, and different government public sectors and NGO’s for taking
remedial action on the problem and for better policy implementation. Secondly, the finding of this study
will be published in reputable international journal for disseminating to different academic scholars,
policy makers and stakeholders.

38
 4. ACTIVITY PLAN AND BUDGET BREAKDOWN

4.1. Activity Plan

Table 3. Activities and time budget

No. Type of activity Time of accomplishment

1 Preparation works Dec. 1 – 30/2020
1.1 Purchase of stationary materials Jan. 2021
1.2 Training of data collectors Feb. 20– 30/2021
1.3 Duplicating and arranging questionnaires Feb. 20– 30 /2021
1.4 Site visit and arrangement for data collection Mar. 1– 15,2021
2 Field Data Collection Mar 16-30/2021
2.1 Household data collection April, 1/2021 – May. 30/2021
2.2 Feeding row data into computer June,1/2021 - June 30/2021
3 Data processing: editing, clearing and entry July, 1/2021 - July. 15/2021
4 Data analysis July 16 – August 15/2021
5. Writing up of the research draft Aug.16- Sept. 15/2021
6. Presenting and submitting the final report Oct.1/2021

39
4.2. Budget Plan

Table 4. Budget breakdown

Researcher Assefa Delesho (PhD.)
I Stationary/Usable Unit Quantit Cost/unit Days Total
y
1 Hand book Number 20 25 -- 500
2 Copy print/20 page Page 8,000 1 -- 8,000
questionnaire for 400
respondents
3 Hard disk Number 3 1300 -- 3900
4 Pen Packet 10 50 -- 500
5 Pencil Packet 6 18 -- 108
Sub-Total 13,008
II Fuel and transport
1 Fuelling Liter 200 20 --
5,000
2 Transport/travel cost Trip 6 200 --
1,200
Sub-Total 6,200
III Personnel cost Function Number Cost/day Days Total
1 Enumerators per-diem Data 25 124 20 62,000
collection
2 Enumerators training per- Training 25 124 2 6,200
diem
4 Facilitator Facilitation 4 206 20 16,480
5 Driver per-diem Driving 1 124 35 4,340
Sub-Total 89,020
IV Researchers per-diem
1 Principal investigator -- 1 206 45 9,270
2 Co-investigator -- 1 206 45 9,270
3 Co-investigator -- 1 206 45 9,270
Sub-Total 27,810
Contingency (10%) 13,603.80
Grand Total 149,641.8
0

Table 5. Budget summary

No Description Total budget
1 Stationary/Usable 13,008
2 Fuel and transport 6,200
3 Personnel cost 89,020
4 Researchers per-diem 27,810
5 Contingency (10%) 13,603.80
6 Total budget 149,641.80 birr
Budget source: Debre Markoss University regular research grant

40
41
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