Livelihoods, growth, and links to market towns in 15 Ethiopian villages

Contrary to the popular belief that rural and urban areas are essentially separate entities, this papers examines the important links that exist between the two. Despite the many potential benefits, the importance of local and regional urban centres to rural livelihoods remains largely under-researched. Knowing more about the nature of links of rural households to market towns is important for guiding regional development policies and poverty-reduction strategies.This paper uses longitudinal data from 15 villages in rural Ethiopia to explore the nature and consequences of these links. It addresses the following questions: <ol> What are the links between rural households and local urban centres? Does better access to local market towns affect household economic behaviour? Does better access to local market towns make households better off?</ol>Three core findings emerge:<ol> a significant proportion of rural people's economic transactions occur in local market towns - they are the prime site for the purchase of agricultural inputs and consumables, and forthe sale of livestock, crops and artisanal products access to market towns affects economic activity in rural areas - the greater the distance from these towns, the less likely households are to purchase inputs or sell a variety of products improved access to market towns has positive effects on welfare - improved transport links significantly increase consumption outcomes and lead to better growth rates.</ol>The results suggest that local market towns and cities play a key role in providing space for the economic activities of rural households. Drawing too strong a divide between rural and urban localities, and envisioning that economic activities are confined to respective urban and rural areas, is misleading. A more fruitful approach is to see these areas as a continuum, running from the capital city, to larger regional centres, to smaller market towns, to the rural spaces. Market towns and cities are an important source of demand for products produced in rural areas and rural residents are a source of demand for goods sold in urban areas. Improving the presence of roads, their quality, and transport options in general, are important factors that will further bind these spaces together and improve rural welfare. [adapted from author]