Ethiopia in the decade up to 2005 has been characterized by robust growth rates of the urban economy, where a still limited share of the population lives. The urban economy has been estimated to contribute at least half of gross domestic product (GDP) (53 percent in 2002/03) and to explain a significant part of its growth. Only an estimated 12.6 percent of the poor live in urban areas and the overwhelming concentration of poverty in rural areas seem unlikely to be reversed in the medium term. Sustained growth, to be shared among a relatively small part of the population, could have been expected to reduce poverty significantly in urban areas, but this has not been the case. While poverty incidence remains lower in urban than in rural areas, rural areas have made significant progress and the rural-urban gap in poverty incidence is decreasing.