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Abstract
The aim of this study is to examine the determinants of income diversification in
rural Ethiopia.
Rural households allocate their work time between farm and of-farm activities to
have secure income (consumption) for their family members. However, it is not
clear why some households participate only in farm activities while others
engage in both. Using survey data collected from 1500 rural households in 1994
and 1997, this study investigates the impacts of demographic, economic, and risk
factors on participation and intensity of off-farm activities. The results of the study
show that families with high dependency ratio, female household heads, high
livestock value, and poor quality of land participated less in off-farm activities.
Competition between off-farm and farm activities and effects of seasonality were
more apparent from the intensity results than from participation. Increased crop
production and sale of part of production during the main harvest season led
households to engage less in off-farm activities. The results also confirm that offfarm
activities were practiced as a means of subsistence when crop production
fails; otherwise farmers abandon off-farm activities.