Domestic Fuel Choice, Scarcity and Agriculture Labour Supply in Rural Ethiopia

Rural households in Ethiopia mainly depend on agriculture for their livelihood and most commonly use traditional biomass as their primary domestic energy source. Using data collected from 925 rural households and 3,241 plots in four regions of Ethiopia, this study examines the determinants of fuel choice in rural Ethiopia, and the impact of biomass fuel scarcity on agricultural labor supply, yields,and returns, across the irrigation/dry, Meher, and Belg cropping seasons. We show that the shadow price of biomass energy sources, which are largely collected from the environment, and the market prices of charcoal and kerosene as well as indicators of wealth, are important determinants of households’ fuel choices. Our findings further indicate that the scarcity of biomass fuel, proxied by shadow price, has a negative and significant effect on agricultural labor supply in the irrigation and Belg seasons, which in turn affects yields and returns from agriculture. This suggests the importance of addressing domestic fuel scarcity alongside efforts to enhance agricultural productivity in rural areas, particularly when introducing interventions such as irrigation.