This study investigates the dynamics of poverty and vulnerability and identifies the sources of poverty and correlates vulnerability to poverty in rural Ethiopia. The results clearly point out that depth and severity of poverty were considerably reduced between 2004 and 2009, leading to reduction of relative poverty between the poor and the non poor. The likelihood of households to be poor was reduced suggesting that they were escaping from poverty. Determinants of poverty status in rural Ethiopia between 2004 and 2009 were household size, marital status, livestock holding, farming occupation, life status, social network, regional dummies, and other omitted idiosyncratic and covariate shocks. The estimated marginal effects show that there were considerable divergences among regional states in terms of poverty reduction effects.
