The paper examines the pattern of poverty, growth and inequality in Ethiopia in the recent decade. The
result shows that growth, to a large extent depends on structural factors such as initial conditions,
vagaries of nature, external shocks and peace and stability both in Ethiopia and in the region. Using a
rich household panel data, the paper also shows that there is a strong correlation between growth and
inequality. In such set up, the effect of implementing a pro-poor growth strategy, compared to allowing
the status quo to prevail, can be quite dramatic. On the basis of realistic assumptions, the paper shows
that from a baseline in 2000 of a thirty percent poverty share, over ten years at growth of four percent
per capita, poverty would decline from forty-four to twenty-six percent for distribution neutral growth
(i.e., no change in the aggregate income distribution). In contrast, were the growth increment
distributed equally across percentiles (Equally distributed gains of growth, EDG), the poverty would
decline by over half, to fifteen percent, a difference of almost eleven percentage points. Thus,
‘distribution matters’, even, or especially in a poor country like Ethiopia. On the basis of these results
the paper outlines policies that could help to design a sustainable pro-poor growth strategy.