The Impact of Non-farm Activities on Poverty Reduction among Rural Farm Households in Ambo District of West Shoa Zone, Oromia Region, Ethiopia

Zewdu Adefris

doi:10.7176/jpid/58-02

Abstract

This study investigated the impact of cash-oriented non-farm activities on poverty reduction among rural farm households in Ambo district of West Shoa zone of Oromia region, Ethiopia. It was conducted in the five selected kebeles; namely Golja, Ya’i Chebo, Uko Korke, Ilamu Goromti and Birbirsa Kulit . Cross-sectional survey was employed to collect data from 300 respondents, in which 150 were participants and 150 were non-participants in remunerative non-farm activities. The cost of basic needs approach was used to estimate absolute poverty line, and the Foster, Greer and Thorbeck index to determine the incidence, depth and severity of poverty among participant and non-participant households. The study employed logit model to identify determinants of non-farm activities participation and propensity score matching method to analyze the impact of non-farm activities on poverty. The study finds that 26.33% of households in the study area are poor. The incidence, depth and severity of poverty were found to be higher among non-participant households than among participant households. The result of logit regression indicated that gender, marital status of household head, dependency ratio, skill, access to credit and distance to the nearest market are identified as determinants of participation in non-farm activities. The propensity score matching results indicated that participation in remunerative non-farm activities has a significant effect on the households’ consumption expenditure level. The average treatment effect of treated indicated that, the average monthly per capita consumption expenditure of participant is birr 72.31 more than non-participants households. These results indicate that the participation in remunerative non-farm activities improved the livelihood of households in the study district. Thus, while this study is not advocating for non-farm economic activities as a substitute to farming, non-farm work could be a reliable complement to farming activities. The promotion of non-farm activities in addition to farm activities seems indispensable to alleviate rural poverty. Keywords: Poverty, Rural farm households, Impact, Non-farm activities, Propensity score matching DOI: 10.7176/JPID/58-02 Publication date: January 31 st 2021

Highlights

In developing countries, non-farm activities play a more and more important role in sustainable development and poverty reduction in rural areas
The general objective of the study is to investigate the impact of non-farm economic activities on poverty reduction among rural farm households in Ambo district of West Shoa Zone, Oromia Region, Ethiopia
As stated in the methodology part, the absolute poverty line used in this study was derived using the cost of basic needs (CBN) approach, which involves 25 food items consumed by the poorest 50% of sample household accessed and used to construct the absolute poverty line

Summary

Introduction

Non-farm activities play a more and more important role in sustainable development and poverty reduction in rural areas. Non-farm activities can influence the rural economy through various channels. Non-farm employment reduces the pressure on the demand for land in poor areas. The income obtained from non-farm activities can significantly increase total household income and enhance the investment capacity in farm activities. It can mitigate income fluctuations and enable the adoption of some more profitable but “risky” agricultural technologies, which favour the transformation of traditional agriculture to modern agriculture. Non-farm income is often a source of savings, which plays an important role in poverty reduction

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Conclusion