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The Dynamics of Income Diversification in Ethiopia: Evidence from Panel data

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  • Adugna Lemi

Abstract

Block and Webb (2001) in food policy address the issue of the dynamics of livelihood diversification in Ethiopia. Their study uses the ratio of per capita income derived from crops to the sum of all other incomes as an indicator of livelihood diversification for the years 1989 and 1994. Their study focuses only on drought-prone areas during the survey years. The aim of the present study is to explore further the demographic and economic determinants of the dynamics of income diversification using survey data. The data used in this study cover larger and more representative sample and was colleted from rural Ethiopia during 1994 and 1997 harvest years. This study investigates not only the determinants of participation and intensity of off-farm activities, but also factors that affect the dynamics between 1994 and 1997. The results of this study attempt to answer the question: to what extent initial conditions (for instance, asset holdings, production, and crop income) prompt households to diversify to off-farm activities overtime. The results show that participation in off-farm activities is mainly driven by demographic factors, whereas land and other asset ownership as well as crop production and income affect intensity of off-farm activities. The dynamic model results show that farm families who have initially diversified to more off-farm activities subsequently realized less income diversification. Families with more initial crop production from slack harvest season subsequently realized greater income from off-farm activities in 1997. The study also confirms that it is only during slack harvest season that off-farm and on-farm activities are complement each other.

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File URL: http://repec.umb.edu/RePEc/files/Lemi_Income_Diversification.pdf
File Function: Revised version, 2006
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Bibliographic Info

Paper provided by University of Massachusetts Boston, Economics Department in its series Working Papers with number 3.

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Length: 33 Pages
Date of creation:
Date of revision:
Handle: RePEc:mab:wpaper:3

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Keywords: Dynamic Livelihood; Off-farm Income; Diversification; Ethiopia;

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References

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  1. Abdulai, Awudu & CroleRees, Anna, 2001. "Determinants of income diversification amongst rural households in Southern Mali," Food Policy, Elsevier, vol. 26(4), pages 437-452, August.
  2. Block, S. & Webb, P., 2001. "The dynamics of livelihood diversification in post-famine Ethiopia," Food Policy, Elsevier, vol. 26(4), pages 333-350, August.
  3. Lanjouw, Jean O. & Lanjouw, Peter, 1995. "Rural nonfarm employment : a survey," Policy Research Working Paper Series 1463, The World Bank.
  4. Ruben, Ruerd & Van den berg, Marrit, 2001. "Nonfarm Employment and Poverty Alleviation of Rural Farm Households in Honduras," World Development, Elsevier, vol. 29(3), pages 549-560, March.
  5. Lanjouw, Peter & Quizon, Jaime & Sparrow, Robert, 2001. "Non-agricultural earnings in peri-urban areas of Tanzania: evidence from household survey data," Food Policy, Elsevier, vol. 26(4), pages 385-403, August.
  6. Lanjouw, Peter, 1999. "Rural Nonagricultural Employment and Poverty in Ecuador," Economic Development and Cultural Change, University of Chicago Press, vol. 48(1), pages 91-122, October.
  7. Woldenhanna, T. & Oskam, A., 2001. "Income diversification and entry barriers: evidence from the Tigray region of northern Ethiopia," Food Policy, Elsevier, vol. 26(4), pages 351-365, August.
  8. Deininger, Klaus & Olinto, Pedro, 2001. "Rural Nonfarm Employment and Income Diversification in Colombia," World Development, Elsevier, vol. 29(3), pages 455-465, March.
  9. Barrett, Christopher B. & Bezuneh, Mesfin & Aboud, Abdillahi, 2001. "Income diversification, poverty traps and policy shocks in Cote d'Ivoire and Kenya," Food Policy, Elsevier, vol. 26(4), pages 367-384, August.
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  11. Pramila Krishnan & Stefan Dercon, 1995. "Income portfolios in rural Ethiopia and Tanzania: choices and constraints," CSAE Working Paper Series 1995-12, Centre for the Study of African Economies, University of Oxford.
  12. Lanjouw, Jean O. & Lanjouw, Peter, 2001. "The rural non-farm sector: issues and evidence from developing countries," Agricultural Economics, Blackwell, vol. 26(1), pages 1-23, October.
  13. Reardon, Thomas, 1997. "Using evidence of household income diversification to inform study of the rural nonfarm labor market in Africa," World Development, Elsevier, vol. 25(5), pages 735-747, May.
  14. Escobal, Javier, 2001. "The Determinants of Nonfarm Income Diversification in Rural Peru," World Development, Elsevier, vol. 29(3), pages 497-508, March.
  15. Barrett, C. B. & Reardon, T. & Webb, P., 2001. "Nonfarm income diversification and household livelihood strategies in rural Africa: concepts, dynamics, and policy implications," Food Policy, Elsevier, vol. 26(4), pages 315-331, August.
  16. Holden, Stein & Shiferaw, Bekele & Pender, John, 2004. "Non-farm income, household welfare, and sustainable land management in a less-favoured area in the Ethiopian highlands," Food Policy, Elsevier, vol. 29(4), pages 369-392, August.
  17. Reardon, Thomas & Berdegue, Julio & Escobar, German, 2001. "Rural Nonfarm Employment and Incomes in Latin America: Overview and Policy Implications," World Development, Elsevier, vol. 29(3), pages 395-409, March.
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