Unemployment in Urban Ethiopia

Abstract: Data from the 2004 wave of the Ethiopian Urban Socio Economic Survey on four major cities of Ethiopia is used to investigate the determinants of unemployment in urban Ethiopia and its impact on household welfare. Regression results from a binary probit model estimation show that urban unemployment in Ethiopia in 2004 is determined by age, marital status, education beyond primary school and living in the capital Addis Ababa. On the other hand, the results on OLS regression of consumption indicate that unemployment adversely affects household consumption expenditure and hence household welfare. Having one more unemployed household member results in a 4.6 percent decline in per capita real consumption expenditure available to the household. Since unemployment negatively affects household welfare, efforts aiming at reducing unemployment will improve welfare. Quality in the higher education system is believed to reduce unemployment and thereby improving welfare. Mechanisms to reduce household size such as family planning are also recommended.