Abstract
A bio-economic model has been calibrated to the socio-economic and biophysical characteristics of a less-favoured area in the Ethiopian highlands. Land degradation, population growth, stagnant technology, and drought necessitates development of non-farm employment opportunities in the area. The model has been used to assess the impact of improved access to non-farm income on household welfare, agricultural production, conservation investments and land degradation in form of soil erosion. The model simulations indicate that access to low-wage off-farm income is restricted by lack of employment opportunities since households otherwise would have engaged in more off-farm wage employment than observed. The simulations show that better (unconstrained) access to low-wage non-farm income has a substantial positive effect on household income. Total agricultural production (crop and livestock production) and farm inputs used are reduced when access to non-farm employment is improved and thus increases the need to import food to the area. Access to non-farm income reduces farm households’ incentives to invest in conservation and this leads to more overall soil erosion and more rapid land degradation even though intensity of production is reduced. Special policies are therefore needed to ensure land conservation and to sustain local food production.
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