The Role Of Pro-poor Public Expenditure On Poverty Reduction In Ethiopia

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The main objective of this study is to assess whether public expenditure on agriculture, education, andrnhealth and road construction have a positive and significant roleon poverty reduction. To ensure thernrobustness of the results, different preliminary tests such as time aeries stationary, serial correlation andrnco-integration tests are conducted. Data at country level are used for estimating the role of pro-poorrnpublic expenditures on poverty reduction. I used ordinary least square econometric analysis by timernseries data, and conclude public expenditure on agriculture, health and road construction are morerneffective in poverty reduction in Ethiopia. A strong relationship exists between independent variables andrnthe dependent variable in the model over the period of 1992-2013. The regression model is not spuriousrnas tested. The time series data of these variables contain unit root and they become stationary afterrnconducting ADF test. They have long run relation as indicated by Granger casual co-integration test. Thernstatistically significant elasticity coefficient of OLS estimation at level expresses that the 1% change inrnper capita public expenditure on agriculture, education and road will change the electricity humanrndevelopment index (HDI) by 0.18%.0.05%, and 0.03% respectively these shows that increasing volume ofrnper capita public expenditure on agriculture, education and road has a role to increase electricity HDIrnand thereby reduce poverty in the country. Thus, the Ethiopian government should formulate policies thatrncan help to mobilize domestic and foreign aid in the productive sector like agriculture, education andrnroad in order to achieve desired economic growth that can increase electricity human development indexrnand in turn create gainful income to the mass of Ethiopian people to reduce poverty. The results of ErrorrnCorrection Model indicate that there is both short and long run equilibrium in the system. The coefficientrnof one period lag residual coefficient is negative and significant which represent the long runrnequilibrium. The coefficient is -0.237 meaning that system corrects its previous period disequilibrium at arnspeed of 23.7% annually. In nut shell, the public expenditure management should be based on impactrnassessment. In other words, spending money on the provision of public goods and services must take in tornaccount the extent to which this expenditure benefits the poor. Therefore, to maximise the povertyrnreduction role of pro-poor public expenditures, the government of Ethiopia should focus more on thernfulfilment and improvement of basic necessities of the poor such as agriculture, primary health care,rnprimary education, rural infrastructures and food security by allocating more public resources to the pro-rnpoor sectors than that of universal and non-basic services and goods.rnKey words; pro-poor public expenditure, Human development index, co-integration analysis, povertyrnreduction.

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The Role Of Pro-poor Public Expenditure On Poverty Reduction In Ethiopia

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