The Determinants of Non-Farm Income Diversification in Rural Ethiopia

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Diversification has long been viewed as a risk minimization strategy in the face of increasing climatic and economic risks in developing countries. This paper examines the determinants of non-farm income diversification in rural Ethiopia for a four-wave panel of 1240 households from the Ethiopian Rural
Household Survey over the period 1994–2009. The paper makes a conceptual distinction between non-farm and off-farm income and uses fixed and random-effects models to control for unobserved characteristics. The results suggest that the variables that determine non-farm diversification consumption per capita and livestock holdings—belong to pull factors and reflect a strategy by wealthier households. Coupled with instrumental variable estimations to ascertain the direction of causality, these findings lend support to the argument that the main motivation for increasing non-farm diversification is likely to be accumulation.


  • Martin Prowse
Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Social and Economic Geography


  • rural Ethiopia, fixed and random effects, Non-farm diversification
Original languageEnglish
Pages (from-to)109-130
JournalJournal of Poverty Alleviation and International Development
Issue number1
Publication statusPublished - 2015
Publication categoryResearch

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