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Summary This study analyzes the persistence of poverty in both rural and urban areas in Ethiopia during 1994-2004. The key finding is that households move frequently in and out of poverty but the difficulty of exiting from poverty, like the chance of avoiding slipping back, increases with the time spent in that state and varies considerably between male- and female-headed households. Our results imply that it is important to design anti-poverty policies both to hinder households from slipping into extreme poverty and to minimize the length of the poverty spell for households once they have fallen into it.