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Determinants of Household Poverty: The Case of Shashemene Town, Oromia, Ethiopia

Ethiopia is one of the world’s poorest countries by any standards. As a result government, multilateral agencies and other stakeholders consider poverty as their priority issues. This study is the study on determinants of urban poverty with the objective of identifying the poor from non poor households and main factors those push them to the poverty trap. Cost of Basic Needs (CBN) approach is used to calculate food poverty line and total poverty line respectively. Out of the 381 surveyed household heads, 170(44.62%) of them were found poor. A total of 381 respondents were included in the survey and the main data for the study was collected through structured questionnaire. Binary Logit model was employed to analyze the determinants of households’ poverty. Fourteen explanatory variables were taken in to account in the model’s equation. The result of logit regression using STATA13.1 software confirmed that nine variables were found statistically significant; age of households (1%), income of house hold head (1%), marital status of households(1%), house tenure of households(1%), household family size (1%), households employment status(1%),educational level of households(5%),access to credit(5%) and saving(10%). From these significant variables; age of households, households’ family size, households’ marital status and households housing tenure were positively correlated with probability of being poor. While households education, households income, households saving, households employment status and households access to credits were negatively correlated with probability of being poor. Two sample t-test and chi-squared test was employed to compare non-poor and poor. The poverty head count ratio is extensive among the surveyed households that calls for urgent interventions aimed at solving the problems of the poor. Hence efforts should be made to increase the real income of households through well paying and better job creation by the set up of micro and small scale enterprises, with the increased provision of economic and social infrastructure. Thus, stakeholder interventions to tackle the determinant factors are important measures to be undertaken.