Agricultural productivity, land use intensification and rural household welfare: evidence from Ethiopia

While the role of agricultural productivity in alleviating poverty and enhancing household well-being is widely acknowledged, the micro-level evidence on the relationship between smallholder productivity and rural household welfare remains scarce in sub-Saharan Africa. Utilising three-wave comprehensive panel data from rural Ethiopia, this paper offers valuable insights into the effect of maize productivity on rural household welfare. We use both fixed-effects and correlated random-effects IV estimators to account for unobserved heterogeneity and endogeneity. Our findings reveal that increased maize productivity leads to higher household income, enhanced maize consumption, and greater asset ownership, ultimately reducing rural poverty. Notably, the welfare gains from maize productivity vary among farm households, with the most substantial effects observed among advantaged households, particularly those headed by male farmers and those with a more favourable economic standing in terms of poverty status. These results not only hold promise for poverty reduction through intensified agricultural practices in rural Ethiopia but also emphasise the necessity for targeted interventions to ensure equitable distribution of welfare benefits.