The Effect of Urbanization on Income Generating Capacity: The Mediating Role of Housing Problem

Abstract

As urbanization has occurred without the attendant growth and development spillovers in underdeveloped nations including Ethiopia, the phenomenon brought undesirable social and economic consequences. This paper looks at the effect of urbanization on income generating capacity of citizens emphasizing the mediating role of housing problem. We present an innovative approach that sheds light on understanding the contemporary urban problems associated with unmanaged urbanization and the options to mitigate those negative consequences in the Ethiopian context, especially in Amhara region. Structural Equation Modeling was used to run mediation analysis through decomposing the direct and indirect effects of one variable on the other. Correlation and regression analyses were also carried out to measure the direction and magnitude of the effect of the independent variable on the dependent. Regression analysis results indicate the existence of a significant direct effect of urbanization on limitations in income generating capacity of citizens. The mediation analysis result shows housing problem doesn't play the mediating role between urbanization and limitations in income generating capacity. That is, urbanization has a significant direct effect on income generating capacity limitations rather than being mediated by housing problem. The paper recommends taking policy measures to include development agendas of small and medium towns into regional plans as they absorb the influx to large cities and can help migrants experience the challenging complex urban life step by step. In addition, a policy intervention in the area of land tenure system and real estate development is required before the housing problems get worse. Awareness creation for the rural people on the demerits of migrating to cities is also worth considering as it helps the migrants reconcile their expectations with the reality. Moreover, devising mechanisms to make the youth beneficial from the available job opportunities by encouraging employers so that they recruit the youth rather than over subscribe the vacancies is essential.