Pathways to breaking the poverty trap in Ethiopia: Investments in agricultural water, education, and markets

Investments in agricultural water management should complement or strengthen the livelihood andcoping systems of the rural poor, and should thus be instrumental for breaking the poverty trap inEthiopia. Underdeveloped water resources constrain progress towards poverty reduction. We examinelinkages and complementarities between agricultural water, education, markets and rural povertythrough an empirical study using household level data from selected villages in southern Ethiopia. Weshow that investments in irrigation can contribute to poverty reduction, but the poverty reducingimpacts of irrigation water are greater when human capital and rural markets are well developed. Thesize of landholding, access to irrigation water, on-farmland and water conservation practices, literacy ofthe household head, and years of education of adults are all significant determinants of householdwelfare, and thus potential pathways for reducing poverty. Expansion of cultivated land, particularlyirrigated land, universal literacy, and an extra school year for adults all reduce poverty, but reductions inpoverty are greater when irrigation is combined with universal literacy. These findings call forsimultaneous investments in agricultural water, education, markets and related policy supportmeasures for reducing poverty in smallholder agriculture in Ethiopia.