Determinant factors of livelihood diversification: Evidence from Ethiopia

Ethiopia’s agricultural productivity is considered low despite the presence of various agricultural policies. These policies focus mainly on on-farm agricultural development to the neglect of rich opportunities for non-agricultural livelihood diversification activities. Livelihood diversification is a strategy that can boost farmers’ income and promote sustainable land management practices. This study investigates the factors that determine the probability that a farm household participates in non-agricultural income diversification activities in Ethiopia. It employed Logit econometric model to investigate the probability that a farm household participates in non-agricultural income diversification activities in the rural area, and the Seemingly Unrelated Regression (SUR) model to estimate a system of equations consisting of on-farm, off-farm and non-farm income generating activities of Ethiopia. Estimation showed that institutional factors such as secured perception of land ownership and becoming membership in cooperatives have significant influence on the probability of farm households’ participation in non-agricultural activities.