From Rural to Urban, but not Through Migration: Household Livelihood Responses to Urban Reclassification in Northern Ethiopia†

Rural villages in peri-urban Ethiopia are being rezoned and reclassified as urban through land expropriation and legislation to fulfil demand for urban use. We provide empirical evidence on changes in income diversification strategies of affected farm households, in Tigray, Northern Ethiopia. We use data collected from farm households on either side of the adjusted urban boundary. The survey took place two years post land expropriation, and five years post rezoning to urban, when local governments compensated farmers for the lost land with substantial amounts of cash relative to annual farm earnings. Multinomial logit estimation results reveal that the urban-reclassified households continue to rely on agricultural income, despite their limited access to farmland post-expropriation. Combining farming with skilled nonfarm employment is the most common strategy for better-off households under both rural and urban administrations. However, poor households rezoned to urban are less likely to participate in nonfarm employment than rural households. Prior experience in the nonfarm sector drives participation in skilled nonfarm employment more strongly than the amount of land compensation awarded. This has important implications for urban policymakers implementing land expropriation, where the implicit assumption is that the cash injection will stimulate entry into skilled employment or business start-ups and smooth the transition into urban livelihoods.