Abstract
Data from 500 rural farm households were collected using multistage sampling technique from Gamo Gofa Zone, Southern Ethiopia and the determinants of off farm income diversification and its effect on rural poverty were examined with the help of logit and multinomial logit model. The regression result revealed that age, education, access to infrastructure, livestock ownerships, credits uses, and farm income are the main determinants of households’ participation in off farm activities. In addition, off farm participation rate was 76% while off farm income accounts for 51% of the total household income in the study areas. The estimation results of the logit model also showed that off farm participation significantly reduces the probability of being poor of rural farm households. The study also determined the poverty line and about 29.8% of the population were found below poverty line. Therefore, to reduce rural poverty, entry barriers to off farm activities (access to finance, market, education and infrastructures) need to be overcome and off farm opportunities (micro and small enterprises) in rural areas have to be expanded by government. Key words: Off farm income, livelihood diversification, rural poverty, multinomial logit, Ethiopia.
Highlights
Lives and livelihoods of rural households of developing countries are married with agricultural activities
As the estimation results of multinomial logit model shows, age of household head, years of schooling of household head, access to infrastructure, livestock ownerships, credits uses, farm income, and locational characteristics are the main determinants of the probability/chance of households’ participation in off farm activities in in the study areas
The off farm participation rate is 76% and off farm income accounts for 51% of the total household income in the study areas and this is in agreement with the study conducted by Demeke (1997) on the Northern part of Ethiopia who found that off farm income accounts for 59% of rural household income
Summary
Lives and livelihoods of rural households of developing countries are married with agricultural activities. The rapid population growth and a decline in the ratio of agricultural land to population leads to greater vulnerability and lower resilience to poverty and food insecurity in developing economies, like Ethiopia. Diversification of income sources, assets and occupation is very important for individuals or household in developing countries. Africa are not exception to this phenomenon (Adugna, 2005). Farm households diversify their income sources for at least two motives; pull factors and push factor. The pull factor is diversification undertaken for asset accumulation objectives whereas push factors is diversification undertaken to reduce vulnerability and build resilience to shocks (Abdul-Malek and Usami, 2010)
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