Determinants of Income Diversification among Rural Farm Household in Soddo District, Gurage Zone of Southern Ethiopia

Mathews Jose Teji

doi:10.7176/dcs/10-10-02

Abstract

Soddo Woreda is one of the major producers of agricultural product in Gurage zone but, it lacks well-organized and arranged marketing system that highly affects fair distribution of income diversification. The overall objective of this study was to analyze the determinants of income diversification rural farm households in Soddo Woreda. This paper examines the determinants of income diversification among rural households using cross sectional data collected through a multi-stage random sampling technique and selected 200 sample from farm households of Soddo District of Gurage Zone, southern Ethiopia. Both descriptive statistics and rigorous econometric models are used to analyze the data. Multinomial logit model was used to analyze factors influencing households’ participation in off/non-farm income activities. The Herfindahl-Hirschman Index (HHI), shows that agricultural activities are the most important and basic source of income for rural households in Soddo District contributing crop income 58.16% and livestock income 28.49% summing up farm income 86.7% of total household income with the remaining 13.3% originating from off-farm 3.7% and non-farm 9.6% income activities. About 74% of the sample households involved in off/non-farm income activities and 26% involves in farm income only. The involvement in off/non-farm employment activities and the level of income derived are found to be influenced by human capital related variables (gender and age of household head, number of family m embers, education level of household head, attitude to risk and ), livelihood assets (livestock holding, size of cultivated land, irrigated land, wealth of households, aggregate total crop product) and infrastructure related variable (proximity to market, extension service, access to credit and cooperative). The results imply that these factors need to be considered by policy makers in the planning of agricultural and off/non-farm initiatives in this study area. Keywords: Income diversification, Herfindahl-Hirschman Index (HHI). DOI: 10.7176/DCS/10-10-02 Publication date: October 31 st 2020

Highlights

Background the studyAgriculture remains the main source of income for the majority of the rural population of developing countries
A large proportion of rural households modify their economic activities in a variety of ways under different conditions (Ellis, 2000)
Objectives of the Study 3.1 General Objective The general objective of this study was to analyze the determinants of income diversification of households (HHs) involvement in off-farm/non-farm activities in rural farm households in Soddo District, Gurage Zone

Summary

Introduction

Background the studyAgriculture remains the main source of income for the majority of the rural population of developing countries. Farm households may intensify extensity or diversify their agricultural production. They may diversify their portfolio of economic activities outside agriculture either on or outside of the farm, or some members might migrate to other areas temporarily or permanently in search of better opportunities. In this study diversification refers to a process in which households voluntarily or involuntarily increase the number of economic activities they are involved in. Diversification is defined as the process by which rural households construct increasingly diverse livelihood portfolios, making use of increasingly diverse combinations of resources and assets in order to meet their basic needs, improve their living standards or welfare, and manage risk (Niehof, A., 2004). Non-farm & offfarm income generating activities provide an important source of primary employment in the rural areas of most developing countries’, and it is assumed that as farm size due to population pressure becomes smaller, the percentage of non-farm income becomes larger (Hilson, 2016)

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