Department of Economics

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    unraveling the Cost of War: Estimating the Effect of War Damage on Household's Food and Nutrition Securely in Tigray, Ethiopia.
    (Mekelle University, 2025-10-25) Mulugeta Kassie Agezew
    This study investigates the long-term impacts of asset damage resulting from the 2020–2022 Tigray conflict on household food insecurity and dietary diversity in Ethiopia's Tigray region, utilizing a sample of 400 households from the Samre and Bora districts. Employing an instrumental variable (IV) approach with a control function to address endogeneity—using distance to enemy entry gates and neighbor exposure as instruments—the research establishes a causal link between war-induced asset loss and deteriorating nutritional outcomes. Descriptive statistics reveal significant disparities: the "Damage Group" (49.25%, N=197) exhibits younger heads (42.26 years vs. 48.03), higher male headship (76.6% vs. 67.5%), lower education (6.274 vs. 7.517 years), and smaller landholdings (0.563 vs. 0.653 hectares) compared to the "Safe Group" (50.75%, N=203). Critically, only 7.9% of damaged households are food secure (vs. 47.2%), with 73.4% severely insecure (vs. 46.7%), and dietary diversity is markedly lower, with 46.8% in low diversity (vs. 26.4%) and just 6.4% in high diversity (vs. 35.0%). Empirical analysis, grounded in ordered probit and Poisson regressions, confirms these disparities. For food insecurity, asset damage increases the latent severity by 0.703 units (p<0.001), reducing food security probability by 21% and raising severe insecurity by 22.8%, with a 19.3% higher insecurity score (IRR=1.199, p<0.1). For dietary diversity, it decreases the latent variable by 0.928 units (p<0.001), increasing low diversity by 31.8% and reducing high diversity by 30%, with a 37.7% lower Household Dietary Diversity Score (IRR=0.623, p<0.01). Covariates like age, family size, and education modulate these effects, while strong error correlations (ρ=-0.932 for insecurity, ρ=0.958 for diversity) validate the endogeneity correction. The robust instruments—distance (negative, p<0.01) and neighbor exposure (positive, p<0.001)—support causal inference, reflecting conflict proximity and spillover dynamics. These findings underscore a vicious cycle of poverty and malnutrition, with asset destruction eroding productive capacity and resilience, particularly among targeted younger households. The study’s implications extend beyond Tigray, offering evidence for targeted asset restoration, human capital enhancement, and inclusive growth strategies in post-conflict settings. Future research should explore longitudinal recovery, gender-specific impacts, and policy interventions like cash transfers to inform sustainable recovery efforts. Conducted as of May 2025, this analysis provides a critical foundation for addressing Ethiopia’s fragile agrarian vulnerabilities amid ongoing conflict legacies
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    The nexus between energy poverty and food poverty: Empirical evidence within Wereda Laelay Maychew Central Zone of Tigray region
    (Mekelle University, 2025-09-23) Zemichael G/yohans
    This study rigorously quantifies the causal effect of household energy poverty on the severity of food insecurity in Wereda Laelay Maychew, Central Zone of Tigray, addressing the critical methodological challenge of endogeneity present in previous correlation-based studies. The research employed a two-stage Control Function Approach (CFA), using geographic distance to the electricity grid as a valid instrumental variable. This allowed for unconfounded estimation of the impact on the Household Food Insecurity Access Score (HFIA_Score_27), a continuous count variable, via a corrected Poisson regression model. The formal endogeneity test conclusively validated the necessity of the CFA correction (P<0.001). The corrected estimates established a robust, positive, and highly significant causal relationship. Specifically, the Average Marginal Effect (AME) revealed that being classified as energy poor causes the expected HFIA_Score_27 to increase by an average of 15.72 units (P<0.001). This strong quantitative evidence moves beyond mere association, establishing energy poverty as a fundamental structural determinant that significantly compromises food security. The findings necessitate an integrated policy framework prioritizing substantial investment in clean, affordable household energy access as an essential strategy for sustainable reductions in food insecurity.
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    Factors that Affect the Productivity of Sesame of Smallholder farmers: The Case of Tahtay Adiyabo Woreda, Northwestern Zone, Tigray Region, Northern Ethiopia.
    (Mekelle University, 2025-11-23) Yirdaw Hagos
    This study analyzed the factors affecting the productivity of sesame among smallholder farmers in Tahtay Adiyabo Woreda, Northwestern Zone of Tigray, Ethiopia. The main objective was to identify agronomic, socio-economic, and institutional determinants influencing sesame productivity and to provide policy-relevant recommendations for improving output. A mixed research design was employed, integrating both qualitative and quantitative approaches to enhance data reliability. Primary and secondary data sources were used. The study relied on cross-sectional data collected from 242 smallholder farmers during the 2024/2025 production season through structured questionnaires. A multistage sampling technique was used to select three kebelles, based on their sesame production potential, followed by proportional random sampling of farm households. To analyse the data, descriptive statistics such as means, frequencies, percentages, and standard deviations, and an econometric model, particularly the Ordinary Least Squares (OLS) estimation technique, were used. The econometric analysis utilized an Ordinary Least Squares (OLS) regression model grounded on the Cobb–Douglas production function to estimate the determinants of sesame productivity. Descriptive results revealed that the average household head was 46.6 years old with a family size of 5.11, a mean landholding of 4.24 ha, and 13.6 years of farming experience. The mean log of sesame productivity was approximately 13.8 quintals per hectare. The OLS results (R² = 0.511, F = 20.99, p < 0.001) identified land size, market access, extension service, off-farm participation, and pesticide use as statistically significant variables influencing sesame productivity. The results show that variations in productivity across kebelles: Adiaser recorded the highest yield (16.38 quintals/ha), followed by Aditsetser (14.58 quintals/ha), while Ademiti had the lowest (11.45 quintals/ha). The results highlight that productivity gaps are mainly due to uneven institutional support, input access, and market linkages. Overall, the study found that sesame productivity in Tahtay Adiyabo Woreda is constrained by intertwined socio-economic and institutional factors rather than demographic ones. It recommends strengthening agricultural extension services, improving credit accessibility, promoting off-farm income diversification, and investing in market and infrastructure development. Additionally, promoting climate-resilient practices and soil fertility management is crucial to enhancing productivity and sustaining sesame farming.
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    Adoption of Modern Agricultural Technologies in Urban Agriculture: A Case Study in Abiy-Adi town -Vegetable Growers
    (Mekelle University, 2025-10-23) Teame Gebreyosus
    Modern agricultural technology plays a vital role in enhancing farmers' productivity and promoting sustainable farming practices. This study investigates the determinants influencing the adoption of fertilizer and pesticide in urban agricultural farming. A total of 240 respondents were surveyed using both primary and secondary data sources. The collected data were analyzed through descriptive statistics and Econometric models. Specifically, a Logit model was employed to identify the determinants of adoption, while propensity score matching (PSM) was used to assess the impact of adoption on household income. The results reveal that age, gender, farming experience, attitude, perception of cost toward modern technology, extension support, use of organic manure, and scarcity of irrigation water are significant factors affecting adoption decisions. Among these, age, attitude, and use of organic manure were found to have a negative relationship with adoption. Moreover, the adoption of modern agricultural technologies has a significant positive impact on farmers' income. The findings indicate that the average treatment effect (ATE) of adoption on household income is 262,519 birr, while the average treatment effect on the treated (ATT) is 61,578 birr. The higher ATE compared to the ATT suggests that non-adopters could potentially gain even more income benefits if they adopted modern agricultural technologies. This implies that adopters may not yet be fully optimizing the use of fertilizer and pesticides, possibly due to limited experience, inadequate training, or resource constraints. In contrast, non-adopters have a higher untapped potential for income improvement once barriers to adoption are addressed. To bridge this gap, policy interventions should focus on strengthening agricultural extension and capacity-building programs to ensure effective and efficient use of modern technologies. Tailored training and demonstration programs should be introduced to improve farmers' technical knowledge and management practices. Additionally, enhancing access to affordable inputs through subsidies, credit schemes, or cooperative purchasing, along with improving irrigation infrastructure, can encourage wider adoption and help farmers maximize the income potential indicated by the ATE. These measures would contribute to more equitable and sustainable income growth among urban farmers,
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    Cost-Effectiveness Analysis of Fertilizer Input on Sorghum Productivity in Tahtay Adyabo, northwester Tigrai
    (Mekelle University, 2025-09-23) Surafeal Gerezghir
    This study evaluates the cost-effectiveness of various fertilizer inputs on sorghum productivity in Sheraro, Northwestern Tigray. Sorghum (Sorghum bicolor) plays a vital role in Ethiopian agriculture, serving as a staple food and a key source of income for many households. Utilizing a mixed-methods approach, this research examines the impact of different types of fertilizers organic, inorganic, and blended on yield outcomes, economic viability, and soil health. Key findings indicate that nitrogen-based fertilizers are predominantly used among farmers, yet a significant interest in organic options is emerging. The economic analysis reveals that integrated nutrient management practices can enhance productivity while promoting sustainability. This study provides practical recommendations for farmers, aiming to improve their fertilizer use efficiency and inform agricultural policy decisions. By addressing the gaps in knowledge regarding fertilizer effectiveness and its economic implications, this research contributes to the ongoing efforts to enhance agricultural productivity and food security in Ethiopia.
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    The Impact of Foreign Direct Investment on Poverty Reduction in Ethiopia: A Cointegrated VAR Approach
    (Mekelle University, 2025-08-23) Shishay Tsehaye
    This study investigates the impact of Foreign Direct Investment on poverty reduction in Ethiopia over the period 1990 to 2023, employing a Cointegrated Vector Autoregressive model. The primary objective is to examine both the long-run and short-run dynamics between Foreign Direct Investment inflows and poverty, proxied by real Gross Domestic Product per capita, while controlling for trade openness, government expenditure, inflation, infrastructure development, and education expenditure. The research uses annual secondary data sourced from the World Bank, the United Nations Conference on Trade and Development, the National Bank of Ethiopia, and the Ethiopian Investment Commission. Stationarity was tested using the Augmented Dickey-Fuller and Phillips-Perron methods, followed by optimal lag selection based on the Akaike Information Criterion, the Schwarz Bayesian Criterion, and the Hannan-Quinn Criterion. Johansen cointegration analysis confirmed the existence of two long-run equilibrium relationships among the variables, leading to the estimation of a Vector Error Correction Model. The empirical findings reveal a positive and statistically significant long-run effect of Foreign Direct Investment on real Gross Domestic Product per capita, indicating that sustained Foreign Direct Investment inflows contribute to improved living standards and poverty reduction. Infrastructure and education spending were also found to enhance the poverty-reducing effects of Foreign Direct Investment, while inflation exerted a negative impact. Short-run effects of Foreign Direct Investment on poverty reduction were positive but smaller in magnitude, with the error correction term indicating a thirty-seven percent annual adjustment toward long-run equilibrium. Granger causality tests confirmed unidirectional causality from Foreign Direct Investment to poverty reduction. Variance decomposition and impulse response functions further underscored the importance of Foreign Direct Investment in explaining changes in living standards over time. The study concludes that Foreign Direct Investment plays a significant role in poverty reduction in Ethiopia when supported by investments in infrastructure and human capital, alongside macroeconomic stability. Policy recommendations include strengthening the investment climate, targeting Foreign Direct Investment toward labor-intensive and pro-poor sectors, expanding infrastructure, improving education and vocational training, and ensuring macroeconomic stability. These findings provide both academic and policy relevance, offering evidence-based guidance for maximizing the developmental benefits of Foreign Direct Investment in Ethiopia.
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    Unraveling the Cost of War: Estimating the Effect of War Damage on Household's Food and Nutrition Securely in Tigray, Ethiopia
    (Mekelle University, 2025-10-23) Mulugeta Kassie
    This study investigates the long-term impacts of asset damage resulting from the 2020–2022 Tigray conflict on household food insecurity and dietary diversity in Ethiopia's Tigray region, utilizing a sample of 400 households from the Samre and Bora districts. Employing an instrumental variable (IV) approach with a control function to address endogeneity—using distance to enemy entry gates and neighbor exposure as instruments—the research establishes a causal link between war-induced asset loss and deteriorating nutritional outcomes. Descriptive statistics reveal significant disparities: the "Damage Group" (49.25%, N=197) exhibits younger heads (42.26 years vs. 48.03), higher male headship (76.6% vs. 67.5%), lower education (6.274 vs. 7.517 years), and smaller landholdings (0.563 vs. 0.653 hectares) compared to the "Safe Group" (50.75%, N=203). Critically, only 7.9% of damaged households are food secure (vs. 47.2%), with 73.4% severely insecure (vs. 46.7%), and dietary diversity is markedly lower, with 46.8% in low diversity (vs. 26.4%) and just 6.4% in high diversity (vs. 35.0%). Empirical analysis, grounded in ordered probit and Poisson regressions, confirms these disparities. For food insecurity, asset damage increases the latent severity by 0.703 units (p<0.001), reducing food security probability by 21% and raising severe insecurity by 22.8%, with a 19.3% higher insecurity score (IRR=1.199, p<0.1). For dietary diversity, it decreases the latent variable by 0.928 units (p<0.001), increasing low diversity by 31.8% and reducing high diversity by 30%, with a 37.7% lower Household Dietary Diversity Score (IRR=0.623, p<0.01). Covariates like age, family size, and education modulate these effects, while strong error correlations (ρ=-0.932 for insecurity, ρ=0.958 for diversity) validate the endogeneity correction. The robust instruments—distance (negative, p<0.01) and neighbor exposure (positive, p<0.001)—support causal inference, reflecting conflict proximity and spillover dynamics. These findings underscore a vicious cycle of poverty and malnutrition, with asset destruction eroding productive capacity and resilience, particularly among targeted younger households. The study’s implications extend beyond Tigray, offering evidence for targeted asset restoration, human capital enhancement, and inclusive growth strategies in post-conflict settings. Future research should explore longitudinal recovery, gender-specific impacts, and policy interventions like cash transfers to inform sustainable recovery efforts. Conducted as of May 2025, this analysis provides a critical foundation for addressing Ethiopia’s fragile agrarian vulnerabilities amid ongoing conflict legacies
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    WHAT DETERMINES THE GROWTH OF SMALL AND MEDIUM SCALE INDUSTRIES: ADYNAMIC PANEL STUDY Evidence from Northern Part of Ethiopia (Tigray Region)
    (Mekelle University, 2025-10-25) Mulubrhan Hailemariam Alemayehu
    This study examines what determines the growth of small and medium sized firms (SMEs) in Ethiopian manufacturing industry particularly in Northern part of the country. The study uses dynamic panel data and System GMM estimation to control for the effect of unobserved heterogeneity and endogeneity in the firm growth-size relationship. The study attempted to address the potential problem of endogeneity and unobserved firm’s heterogeneity using System GMM. It also addresses the statistical concerns in growth-size models such as sample selection bias and regression fallacy using OLS. The empirical results show that size is inversely related to firm growth, implying that smaller firms grow faster than larger firms. The growth and size relationship is robust irrespective of the change in firm size and age coverage as well use alternative growth model and regression to the mean. Thus, Gibrat’s Law is decisively refuted. Both the labor productivity and skill affect firm’s employment and out-put growth with robust level of significance, and thus entails skill engenders efficiency and it eventually brings productivity. Capital influences growth rate positive when it is working capital, and negative while fixed capital. The negative relationship between capital deepening and growth rate suggest that either the SMEs substitutes capital for labor or produces under capacity in terms of employment and added value growth model respectively. The two growth models, employment and added value, brings the same results except slight magnitude differences. Hence, firms are higher elastic for out-put growth than employment growth for their size and availability of liquid asset. From policy perspective, Government’s policy making efforts in combating the poverty, the unemployment and stimulating income generation should be reinforced by promotion of firms which grow faster (small firms) as those will contribute more to employment generation and added value.
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    The Determinants of Institutional Credit Access of Smallholder Farmers in woreda Raya Alamta. Southern zone of Tigray, Northern Ethiopia
    (Mekelle University, 2025-08-25) Muleta Amare
    This study aimed to analyse the determinants of access to formal credit by smallholder farmers in Raya Alamata Woreda. Preferences of smallholder farmers towards financial credits was scored and ranked, sources of financial credit for smallholder farmers were assessed and factors affecting formal credit access of small holder farmers were analysed and identified in the study areas. A stratified random sampling procedures were employed to select three rural Kebele administrations and 167 farm household heads were selected using probability proportional to size. Semi-structured interviews were employed for collecting quantitative data from the sampled farm households in the study area. Three Focus group discussion, fifteen key informants’ interview and field observations were held to generate qualitative data. Ranking techniques of credit sources were applied to know the preferences of all respondents and focus group participants for credit sources. Descriptive statistics and binary logit model were employed for analysing the quantitative data. STATA version 14 was used for data analysis. The results of the study were indicated that, out of 167 respondent house hold heads, 74 of the sampled farm households were formal credit users, whereas the remaining 93 of the respondents were non-users. Relatives, friends and neighbours were preferred as the best credit source for borrowers in the study area than other sources due to its interest free, low transaction cost and adjustments of repayment time. In the study areas, access to formal credit services of smallholder farmers was limited due to some-times inconvenience of group lending in which group members took responsibility of paying the defaulters risk, high interest rate charged on borrowers and some respondents having external financial supports. But, the logit model results reveal that sex of household heads, attitudes of household heads towards credit risks, preference of household heads for group lending, age of the household heads and experience of the household heads in credit using are important factors significantly affecting access to formal credit by smallholder farmers.
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    DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN ETHIOPIA
    (Mekelle University, 2025-11-25) MULATA NGUSIE
    Foreign Direct Investment (FDI) plays a vital role in accelerating economic growth and development in developing countries like Ethiopia by supplementing domestic capital, creating employment, and enhancing technology transfer. The main objective of this study is to investigate the determinants of foreign direct investment in Ethiopia during the period 1990-2022. The analysis employed both descriptive and econometric techniques to identify the key macroeconomic and institutional factors influencing FDI. This study examines the determinants of foreign direct investment (FDI) inflows in Ethiopia using recent data and extended variables such as government expenditure and political instability. The ARDL model used in this study is specifically tailored to capture the dynamic relationship between FDI and its determinants, allowing for the analysis of both short-run and long-run interactions despite policy reforms, FDI inflows remain low compared to the country’s potential. The findings aim to provide insights for policymakers to design strategies that effectively attract and sustain foreign investment.Variables such as gross domestic product per capita (GDPk), inflation rate, exchange rate, trade openness, government expenditures (EXPN), and political stability were included in the model. The regression results reveal that GDPk, trade openness, and EXPN have a positive and significant effect on FDI inflows, while inflation, exchange rate volatility, and political instability have a negative and significant impact. The findings imply that maintaining macroeconomic stability, improving infrastructure, and ensuring political and institutional stability are crucial for attracting and sustaining foreign investment in Ethiopia. The study recommends that policymakers focus on creating a stable investment environment and strengthening economic reforms to enhance the country’s competitiveness in the global investment market.