Urban proximity as a determinant of rural self-employment profitability: Evidence from Ethiopia and Tanzania Tillmann von Carnap Department of Economics, Stockholm University Helsinki, June 12, 2018 Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 1 / 26
Motivation Which domestic sources of growth can reduce rural poverty in African economies? Context of growing rural populations and continuing urbanization Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 2 / 26
Motivation Which domestic sources of growth can reduce rural poverty in African economies? Context of growing rural populations and continuing urbanization Rural self-employment as a diversification mechanism When is this a coping mechanism, when a vehicle for welfare improvement? Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 2 / 26
Motivation Which domestic sources of growth can reduce rural poverty in African economies? Context of growing rural populations and continuing urbanization Rural self-employment as a diversification mechanism When is this a coping mechanism, when a vehicle for welfare improvement? Previous research focused on one-dimensional rural-urban divide Detailed data allows to account for heterogeneity of rural areas Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 2 / 26
Motivation Which domestic sources of growth can reduce rural poverty in African economies? Context of growing rural populations and continuing urbanization Rural self-employment as a diversification mechanism When is this a coping mechanism, when a vehicle for welfare improvement? Previous research focused on one-dimensional rural-urban divide Detailed data allows to account for heterogeneity of rural areas Is there a spatial dimension to rural self-employment? Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 2 / 26
Outline Motivation 1 Literature Review & Research Questions 2 Empirical Approach 3 Main Variables Measures of Distance Data Model Results 4 Exploratory Analysis and Robustness checks 5 Discussion 6 Conclusion 7 Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 3 / 26
2.1 Literature Review & Research Questions Economic development across space in Africa Gollin & Rogerson, 2014; Collier & Dercon, 2014 Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 4 / 26
2.1 Literature Review & Research Questions Economic development across space in Africa Gollin & Rogerson, 2014; Collier & Dercon, 2014 Analytics of structural transformation processes in Africa Dorosh & Thurlow, 2013 & 2014; Christiaensen et al., 2011, Beegle et al., 2013 Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 4 / 26
2.1 Literature Review & Research Questions Economic development across space in Africa Gollin & Rogerson, 2014; Collier & Dercon, 2014 Analytics of structural transformation processes in Africa Dorosh & Thurlow, 2013 & 2014; Christiaensen et al., 2011, Beegle et al., 2013 Nonagricultural household enterprises (NAHE): their role and determinants Nagler & Naud´ e, 2017; Corral & Radchenko, 2017; Djido & Shiferaw, 2018 Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 4 / 26
2.1 Literature Review & Research Questions Economic development across space in Africa Gollin & Rogerson, 2014; Collier & Dercon, 2014 Analytics of structural transformation processes in Africa Dorosh & Thurlow, 2013 & 2014; Christiaensen et al., 2011, Beegle et al., 2013 Nonagricultural household enterprises (NAHE): their role and determinants Nagler & Naud´ e, 2017; Corral & Radchenko, 2017; Djido & Shiferaw, 2018 Research questions Does running a NAHE increase household consumption? Is distance to urban markets a relevant determinant of running a NAHE? Does the effect of NAHE on consumption depend on the proximity to urban markets? Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 4 / 26
3.1 Data and Main Variables World Bank Living Standards Measurement Survey - 3500 (Ethiopia) and 1900 (Tanzania) rural households followed over three waves Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 5 / 26
3.1 Data and Main Variables World Bank Living Standards Measurement Survey - 3500 (Ethiopia) and 1900 (Tanzania) rural households followed over three waves Two dependent variables Household food consumption per adult equivalent (logged) Household non-food consumption (logged) Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 5 / 26
3.1 Data and Main Variables World Bank Living Standards Measurement Survey - 3500 (Ethiopia) and 1900 (Tanzania) rural households followed over three waves Two dependent variables Household food consumption per adult equivalent (logged) Household non-food consumption (logged) Main explanatory variable Share of income derived from NAHE (Ethiopia); Dummy whether HH operates NAHE (Tanzania) Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 5 / 26
3.1 Data and Main Variables World Bank Living Standards Measurement Survey - 3500 (Ethiopia) and 1900 (Tanzania) rural households followed over three waves Two dependent variables Household food consumption per adult equivalent (logged) Household non-food consumption (logged) Main explanatory variable Share of income derived from NAHE (Ethiopia); Dummy whether HH operates NAHE (Tanzania) Descriptives Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 5 / 26
3.2 Measures of Distance Tillmann von Carnap (SU) Three possible reference points across space Primary cities - Large cities - Market towns Urban proximity and rural self-employment Helsinki, June 12, 2018 6 / 26 Urban Population 0 200000 400000 600000 Dire Dawa Adama Mek'ele Gonder Awasa Bahir Dar Jijiga Jimma Dessie Shashemene Ethiopia Debre Zeyit (2007) Harer Sodo Nekemte Addis Ababa: 2.74 Mio Arba Minch Hosaina Asela Debre Birhan Debre Markos Dila Kembolcha Adigrat Debre Tabor Sebeta 0 200000 400000 600000 Mwanza Arusha Mbeya Morogoro Tanga Kigoma Dodoma Songea Moshi Tabora Tanzania Iringa (2012) Musoma Bukoba Kibaha Dar Es Salaam: 4.37 Mio Sumbawanga Shinyanga Mtwara Geita Tunduma Kahama Singida Mpanda Handeni Lindi
3.2 Measures of Distance Tillmann von Carnap (SU) Three possible reference points across space Primary cities - Large cities - Market towns Urban Population Figure: City size distribution as per latest census 0 200000 400000 600000 Dire Dawa Adama Mek'ele Gonder Awasa Bahir Dar Jijiga Jimma Dessie Urban proximity and rural self-employment Shashemene Ethiopia Debre Zeyit (2007) Harer Sodo Nekemte Addis Ababa: 2.74 Mio Arba Minch Hosaina Asela Debre Birhan Debre Markos Dila Kembolcha Adigrat Debre Tabor Sebeta 0 200000 400000 600000 Mwanza Arusha Mbeya Morogoro Tanga Kigoma Dodoma Songea Moshi Tabora Tanzania Iringa (2012) Musoma Bukoba Kibaha Dar Es Salaam: 4.37 Mio Helsinki, June 12, 2018 Sumbawanga Shinyanga Mtwara Geita Tunduma Kahama Singida Mpanda Handeni Lindi 6 / 26
3.3 Sample distribution across distance rings Ethiopia Tanzania HHs per distance ring HHs changing HHs per distance ring HHs changing Distance (% of total in year) NAHE status (% of total in year) NAHE status (km) 2011 2013 2015 (% of total in ring) 2008 2010 2012 (% of total in ring) ≤ 50 9.87 10.12 10.14 46.60 4.19 4.06 4.15 42.05 ≤ 100 14.09 14.27 14.25 36.84 7.06 6.83 6.89 46.15 ≤ 150 9.64 9.30 9.70 31.92 5.80 5.84 5.57 47.79 ≤ 200 18.81 18.65 18.60 34.65 10.04 9.90 10.09 41.35 ≤ 250 8.75 8.48 8.41 30.84 6.76 6.67 6.73 40.14 ≤ 300 9.73 9.92 10.02 35.95 8.58 8.70 8.36 54.02 ≤ 350 8.69 8.56 8.58 38.24 14.63 14.28 14.35 42.95 ≤ 400 4.81 4.80 4.89 34.44 8.07 8.03 8.41 54.27 ≤ 450 4.67 4.61 4.69 27.22 4.84 4.95 4.78 43.88 ≤ 500 2.57 2.63 2.48 46.67 5.35 5.37 5.42 46.30 ≤ 550 2.60 2.85 2.56 60.00 3.78 3.96 3.79 50.63 ≤ 600 0.92 0.96 0.95 33.33 6.61 6.67 6.94 40.14 ≤ 650 4.86 4.83 4.72 47.09 14.28 14.75 14.51 46.05 Total per year (%) 100 100 100 37.18 100 100 100 45.65 Total per year (#) 3,578 3,538 3,473 1,982 1,919 1,902 Total (#) 10589 1374 5803 935 Tillmann von Carnap (SU) Urban proximity and rural self-employment Helsinki, June 12, 2018 7 / 26
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