Working Paper

Economy-wide Impacts of Technological Change in Food Staples in Ethiopia: A Macro-micro Approach

This paper assesses the potential impacts from the introduction of high yielding and drought
tolerant varieties of major food staples (wheat and maize) in Ethiopia. We develop a
dynamic Computable General Equilibrium model with a micro-simulation module to examine
the growth, poverty and distributional impacts of agricultural innovations. The analysis shows
that introduction of improved varieties of these food staples is likely to boost the cereal sector
in the country. Other agricultural sub-sectors grow due to increased labour supply. Given that
these staple cereals represent an important share of food consumption for Ethiopian
households, the poverty impact of the interventions is positive. Although rural households
benefit from higher gains in real consumption, poverty declines more in urban areas
compared to the rural. This is mainly because the rural poor are generally far from the poverty
line with a higher initial poverty gap compared to urban households and the urban poor
benefit from price effects. As productivity-enhancing technologies are introduced, there is a
need for policy interventions in rural areas targeting non-agricultural sectors to enhance
growth linkages, increase employment and stimulate inclusive growth.