| Abstract: | Economic growth around the world has not been equal for a long time. Some
economies grow faster while others grow slower. What accounts for the fast
or slow growth is a question worth asking. This study tried to identify the
sources of long run economic growth in Ethiopia. Time series data covering
the period 1981-2011 were employed for the dependent (national income) as
well as independent variables. Explanatory variables including investment,
human capital, foreign aid, rainfall, population and terms of trade were
investigated. The findings show that growth in Ethiopia is positively affected
by investment (physical capital), human capital, foreign aid and rainfall.
Whereas, population growth and terms of trade (the latter is insignificant)
have a negative effect on the growth of real GDP in Ethiopia. Therefore, the
focus regarding the Ethiopian economy should revolve around increasing
saving and investment, paying attention to the enhancement of human
capital, minimizing the influence of weather on the economy, and finally
checking the rapidly growing population. These measures will help achieve
rapid economic growth in Ethiopia. |
