~ 678 ~ ISSN Print: 2394-7500 ISSN Online: 2394-5869 Impact Factor: 5.2 IJAR 2017; 3(7): 678-683 www.allresearchjournal.com Received: 25-05-2017 Accepted: 26-06-2017 Kibrom Kahsu Hailu PhD Scholar, Department of Economics, Andhra University, Andhra Pradesh, India Dr. G Nagaraja Associate Professor, Department of Economics, Andhra University, Andhra Pradesh, India Correspondence Kibrom Kahsu Hailu PhD Scholar, Department of Economics, Andhra University, Andhra Pradesh, India Impact of growth and inequality on poverty in Ethiopia: Empirical evidence from Amhara region Kibrom Kahsu Hailu and Dr. G Nagaraja Abstract Poverty reduction is the fundamental goal of Ethiopia and is to be achieved through sustained and broad based economic growth and income distribution. Therefore, the relationship between economic growth, income distribution and poverty reduction and its change law should be a main concern of policy. At present, a large number of theoretical and empirical studies have shown that economic growth can reduce poverty, but its capacity for poverty reduction is affected by the situation of income distribution. If the income gap widens along with the economic growth, the poor will benefit less from the growth compared to the non-poor. As a result, the poverty reduction effects of economic growth will be partially or completely offset by the increased inequality in income distribution (Datt and Ravallion, 1992; Kakwani, 2000). This study examines the impact of growth and inequality on poverty in Amhara regional of Ethiopia. The study decomposed changes in poverty into growth and redistribution effect by employing the Datt and Ravallion (1992) approach and using panel data from four round household income, consumption and expenditure (HICE) surveys conducted in the region between the period 1995/96 to 2010/11 by the central statistics authority (CSA) of Ethiopia. Result from this study indicated that the substantial decline in poverty incidence in Amhara region for the period between 1995/96 and1999/00 and between 2004/05 and 2010/11 is attributed to the increase in real household per capita expenditure while the reduction in inequality contributed to the reduction in poverty, more than the contribution of rising per capita expenditure, for the period between 1999/00 and 2004/05. Based on the findings of this study, we recommend that appropriate measures need to be taken to reduce the existing inequality to reduce poverty at a higher rate. That is, in order to deal with poverty problems successfully, the issues of income inequality must also be dealt with. Hence, government should implement policies that aim at redistributing income in favour of the poor and middle class households. Keywords: poverty in Ethiopia, inequality, Amhara region Introduction Poverty reduction is the fundamental goal of the Ethiopia and is to be achieved through sustained and broad based economic growth and income distribution. Therefore, the relationship between economic growth, income distribution and poverty reduction and its change law should be a concern of development economics. At present, a large number of theoretical and empirical studies have shown that economic growth can reduce poverty, but its capacity for poverty reduction is affected by the situation of income distribution. If the income gap widens along with the economic growth, the poor will benefit less from the growth compared to the non-poor. As a result, the poverty reduction effects of economic growth will be partially or completely offset by the increased inequality in income distribution (Datt and Ravallion, 1992; Kakwani, 2000) [6, 10] . Over the two decades since the downfall of Derg regime (1974-1991), Ethiopia has made remarkable achievements in economic growth and accelerated the poverty reduction process by implementing various poverty reduction strategies (PRS), such as Sustainable Development and Poverty Reduction Program (SDPRP) and Plan for Accelerated and Sustainable Development to End Poverty (PASDEP). Ethiopia’s economic growth performance is quite vigorous and continued for the tenth consecutive year, with real gross domestic product (GDP) growth touching 10.3 percent in 2013/14. In the context of rapid economic growth, millions of Ethiopian households have shaken off poverty and the poverty incidence rate dropped from 45.5 percent in 1995/96 to 29.6 percent in 2010/11 with an average annual decline of 2.32 percent. Ethiopia is still one of the poorest countries in the world despite the fact that it has been able to register a remarkable International Journal of Applied Research 2017; 3(7): 678-683