1. G REEN F ACTORS, D YNAMISM AND H APPINESS IN E THIOPIA P ASQUALE L. S CANDIZZO 1, F EDERICA A LFANI 12, and S ARA S AVASTANO 1 1 CEIS - University of Rome “Tor Vergata”, 2 FAO 17th ICABR Conference “INNOVATION AND POLICY FOR THE BIOECONOMY” Ravello, Italy, June 18-21, 2013

2. MOTIVATIONS Green growth is conceived as a way to foster economic growth and development through sustainable natural resource use, avoidance of environmental degradation and of biodiversity loss. Land degradation, accelerated soil erosion, and nutrient depletion represent great threats to sustainable agricultural productivity, and thus food security and poverty. GDP and common measures of welfare do not recognize environmental changes. There is a need to identify further indicators that take into account “green factors” such as individual well being.

3. Objectives of the study To explore the role of environmental factors enhancing green growth, and their impact on satisfaction with life in rural Ethiopia. To examine the link between reported subjective well being, on one hand, consumption, access to land and property rights, natural shocks and “green factors”, on the other.

4. The Importance of ‘Green’ Factors Plethora of works on the economics of happiness, limited applications to environmental issues and policy implications have to be further explored. Results of research on happiness and life satisfaction have implications on:  Climatic conditions (Frijters and van Praag 1998; Rehdanz and Maddison, 2005; Brereton et al. 2008);  Droughts (Carrill et al., 2009);  Flooding (Luechinger and Raschky, 2009);  Air pollution (Welsch, 2002, 2005). Policy Questions: “How do environmental conditions affect human well- being”? and “How do individuals value these effects”?

5. Green Growth in Rural Areas of Developing Countries The large majority of population relies on land and natural resources for their income and livelihood. Pressure on land, water, forests, and the biodiversity resources, that are fundamental to sustainable food production, is critical and is likely to grow. – Land degradation, resulting from accelerated soil erosion and nutrient depletion represents one of the main problems that small farmers face (Sutcliffe 1995). – Land expansion through deforestation increase soil erosion. Soil conservation practices help at reducing land degradation (Brenner et al., 2013). – Farmers are vulnerable to climate change, need to adapt to environmental shocks, namely, changes in precipitation and temperature levels (Dejene, 2011).

6. Estimation strategy Following the standard literature, we use an Ordered Probit Estimation Model on SWLS = Satisfaction with Life Scale (Diener et al., 1985), interpreted as a categorical measure of overall utility for farmers. SWLS SWLS is composed by five statements scored from 1 (Strongly disagree) to 7 (Strongly agree): 1.In most ways, my life is close to ideal 2.The conditions of my life are excellent 3.I am completely satisfied with my life 4.So far, I have gotten the important things I want in life 5.If I could live my life over, I would change nothing 30-35 score:Extremely satisfied, much above average 25-29 score: Very satisfied, above average 20-24 score:Somewhat satisfied, average 15-19 score: Slightly dissatisfied, a bit below average 10-14 score: Dissatisfied, clearly below average 5-9 score: Very dissatisfied, much below average

7. Estimation strategy (cont’d) We complement the standard approach using an OLS Model on 2 Dimensions of Life Satisfaction, resulting from the PCA on a set of 14 variables; We are able to identify two most relevant principal components: Personal satisfaction component (1 st PC) Personal satisfaction component (1 st PC)associated to the private and more egoistic dimension of well-being. Social Satisfaction component (2 nd PC) Social Satisfaction component (2 nd PC) associated to social and interpersonal satisfaction, including honesty and trust.

8. Data Source and Descriptive Statistics Data from the 2009 Ethiopian Rural Households Survey (ERHS) including, inter alia, information on perception of poverty, well-being and trust; restricted sample of 1,511 households, out of which 46.36% declared to be somewhat satisfied with life.. UnitMeanSt. Dev.MinMax Socio-Economic Characteristics HH sizeNb.5.802.60116 Age of the headYears52.6215.0614100 Children in the HH%26.7220.620100 Female adults in the HH%26.5417.620100 Education of the headYears 1.922.60016 Consumption per capita USD 18316002,490 Life Satisfaction Satisfaction with Life Scale (SWLS) Nb. 196.62534 Farm Characteristics Land used by the HH ha 1.611.62018.75 HHs practicing soil conservation % 53.6549.880100 HHs having experienced drought in the last 5 years % 38.8148.750100 HHs having experienced flood in the last 5 years%16.6137.230100

9. Ordered Probit Estimation Model Significant at 10%; ** Significant at 5%; *** Significant at 1%. Ordered Probit on Satisfaction with Life Scale Coeff. Household Characteristics Log of household size 0.030** Log years of education of the head -0.112** Share of children in the household -0.209 Share of female adults in the households -0.582*** Log of consumption per capita 1.617** Log of leave out mean consumption in the village 1.419** Interaction log consumption with leave-out mean -0.187** Farm Characteristics Log of total land 0.327*** Log leave-out mean land in the village 1.114** Log of leave-out mean land in the village squared -0.524** HH having right to transfer land to his spouse or children 0.349*** Log of number of donkeys 0.215** HH using fertilizer 0.258*** Green Growth and Shocks HH having experienced drought in last 5 years -0.400*** HH having experienced input prices increase in last 5 years -0.159** HH having experienced too much rain or flood in last 5 yrs.-0.346*** HH having experienced pest or diseases to stock in last 5 yrs.-0.365** HH having experienced lack of access to inputs in last 5 yrs.-0.413*** Herfindal Index of tree diversification 0.442** Dummy for conservation measure – soil bunds 0.223*** Dummy for conservation measure – contour plowing 0.159* Pseudo R-squared 0.091

10. Ordered Probit Estimation Model: Key Results Family size has a positive effect on life satisfaction, but both the number of children and the number of women appear to have a marginal negative effect. Per capita consumption has a positive and significant effect on life satisfaction, but the interaction effect between own and neighbors’ consumption is negative, probably due to social envy or the so called hedonic treadmill. Proxy measure of land tenure security has a positive and significant effect on the probability of being on a higher step of SWL Scale. Environmental shocks negatively affect life satisfaction, whereas, soil conservation measures and tree diversification have a positive and significant effect on SWL.

11. Principal Component Analysis on Perception of Well-being and Trust Principal component analysis (PCA) on 14 items and 1,511 obs. Kaiser–Meyer–Olkin (KMO): 0.774sampling adequate for the analysis Bartlett’s test of sphericity : χ 2 (91) = 9,895.66; p-value <.001 Factor Loadings Comp. 1Comp. 2 Personal satisfaction related component Social Satisfaction related component Eigenvalue4.252.64 % of Variance30.3418.89 Cumulative Variance 30.3449.23

12. Components Loading from PCA My life is determined by my own actions0.254-0.225 I have the power to make important decisions that can change my life0.264-0.277 I am usually able to protect my personal interests0.247-0.273 In most ways my life is close to my ideal0.338-0.185 The conditions of my life are excellent0.349-0.251 I am satisfied with my life0.340-0.228 I have gotten the important things I want in life0.312-0.144 Most people are basically honest0.2530.327 Most people can be trusted0.2560.309 I feel I can trust my neighbors to look after my house when away0.2180.265 I could rely on my neighbor to mail an imp. letter for me0.2180.252 I believe the government does what is right for the people0.1900.236 I am confident of the government officials to do their job0.2150.343 I am confident of the kebele officials to do their job0.2220.345 Eigenvalue4.252.64 Perception of Well-being and Trust: Results from PCA

13. Components Loading from PCA Comp.1 My life is determined by my own actions0.254-0.225 I have the power to make important decisions that can change my life0.264-0.277 I am usually able to protect my personal interests0.247-0.273 In most ways my life is close to my ideal0.338-0.185 The conditions of my life are excellent0.349-0.251 I am satisfied with my life0.340-0.228 I have gotten the important things I want in life0.312-0.144 Most people are basically honest0.2530.327 Most people can be trusted0.2560.309 I feel I can trust my neighbors to look after my house when away0.2180.265 I could rely on my neighbor to mail an imp. letter for me0.2180.252 I believe the government does what is right for the people0.1900.236 I am confident of the government officials to do their job0.2150.343 I am confident of the kebele officials to do their job0.2220.345 Eigenvalue4.252.64 Perception of Well-being and Trust: Results from PCA Individual Component

14. Components Loading from PCA Comp.1Comp.2 My life is determined by my own actions0.254-0.225 I have the power to make important decisions that can change my life0.264-0.277 I am usually able to protect my personal interests0.247-0.273 In most ways my life is close to my ideal0.338-0.185 The conditions of my life are excellent0.349-0.251 I am satisfied with my life0.340-0.228 I have gotten the important things I want in life0.312-0.144 Most people are basically honest0.2530.327 Most people can be trusted0.2560.309 I feel I can trust my neighbors to look after my house when away0.2180.265 I could rely on my neighbor to mail an imp. letter for me0.2180.252 I believe the government does what is right for the people0.1900.236 I am confident of the government officials to do their job0.2150.343 I am confident of the kebele officials to do their job0.2220.345 Eigenvalue4.252.64 Perception of Well-being and Trust: Results from PCA Social Component

15. OLS Estimation Model on Principal Components Significant at 10%; ** Significant at 5%; *** Significant at 1%. VariablesLog I PCLog II PC Household Characteristics Log of household size 0.024-0.094*** Log years of education of the head -0.026***-0.020*** Log age of the head -0.0320.028* Share of children in the household -0.023-0.035 Share of female adults in the households -0.065**-0.016 Log of consumption per capita 0.252**-0.288*** Log of leave out mean consumption in the village 0.231*-0.249*** Interaction log consumption with leave-out mean -0.030*0.031*** Farm Characteristics Log of total land 0.060***-0.052*** Log leave-out mean land in the village 0.194***0.039 Log of leave-out mean land in the village squared -0.103***0.002 HH having right to transfer land to someone else 0.032*0.034** Green Growth HH having experienced drought in last 5 years -0.051***0.003 HH having experienced input prices increase in last 5 years -0.030***-0.008 Extension service – Assistance in obtaining inputs/introducing new crops (I PC) 0.107***0.092*** Herfindal Index of tree diversification 0.071*-0.047* Soil conservation measure – stone bunds 0.089***-0.020** Soil conservation measure – soil bunds 0.004-0.016* Soil conservation measure – contour plowing 0.040**0.011 Constant 0.0664.433*** Observations 1,511 R-squared 0.1420.209

16. OLS Estimation Model on PCs: Key Results 1 st PC associated to the private and more egoistic dimension of SWB Number of women in the household appears to have a negative and significant effect on the 1 st PC; Households with more arable land appear to be more satisfied with the personal and egoistic component of life. 2 nd PC associated to social and interpersonal satisfaction Large families, extensive plots and conservation measures’ adoption seem to have a negative and significant effect on the social and interpersonal component; Own and neighbors’ consumption have negative and significant effects on the 2 nd PClower economic well-being may be compensated by social and interpersonal relations.

17. Conclusions Life satisfaction appears to be significantly related to income, size of the household and other “classical” explanatory variables. Happiness multidimensional measures can be effectively summarized by an economic -individualistic and a social-altruistic component. Green growth variables seem to be important in the Ethiopian context, but with different effects on the two principal components; harvest’s protection against environmental shocks, tree diversification, and soil conservation measures' adoption enhance farmers’ life satisfaction. However, these variables seem to be enhancing the individualistic component of life satisfaction, while they affect negatively the social component.