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Determinants of nonfarm livelihood diversification: evidence from farmers in Ilu Abba Bora zone, Southwestern Ethiopia

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Abstract

Even if economics supports specialization, nonfarm livelihood diversification is considered a viable adaptation strategy for smallholder farmers affected by different socioeconomic, institutional and ecological factors. Nonfarm diversification varies across locations and households. A cross sectional survey was conducted on 380 randomly selected farm households from the study area. This study investigates the determinants of nonfarm livelihood diversification of smallholder farmers from Ilu Abba Bora zone, Southwestern Ethiopia. The double-hurdle model was used to examine factors affecting participation in nonfarm livelihood diversification and the amount of nonfarm income earned. The results indicate that access to market information and nonfarm wage employment opportunity positively and significantly influence both participation and the amount of nonfarm income earned. Dependency ratio, access to nonfarm training and credit access affect the households’ decision to participate in nonfarm activities positively. Moreover, the level of nonfarm income is positively influenced by livestock ownership and attitude towards nonfarm activities but negatively affected by dependency ratio. Hence, the policy measures to promote rural nonfarm diversification should enhance access to market information, nonfarm training, credit and nonfarm employment opportunities for the rural households.

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Data availability

The datasets used during the current study are available from the corresponding author on reasonable request.

Notes

  1. district is a smaller administrative unit below zone while kebele is the lowest organizational unit below district.

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Acknowledgements

We would like to thank development agents and officers at agriculture and rural development offices in Aallee, Bachoo and Diiduu districts for their help in data collection. We are also grateful to an anonymous reviewer for his comment on the earlier version of this manuscript.

Funding

This work is supported by Ethiopian Ministry of Education.

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Authors and Affiliations

  1. Department of Economics, Wollo University, Dessie, Ethiopia

    Mandefro Seifu

  2. School of Agricultural Economics and Agribusiness, Haramaya University, Haramaya, Ethiopia

    Jema Haji

  3. Department of Economics, Haramaya University, Haramaya, Ethiopia

    Temesgen Keno

  4. Department of Forest Resource Management, University of British Colombia, Vancouver, Canada

    Dawit Diriba

  5. Center for Environment and Development, College of Development Studies, Addis Ababa University, Addis Ababa, Ethiopia

    Dawit Diriba

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  1. Mandefro Seifu
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The article is part of an ongoing Ph.D. dissertation of the corresponding author. The corresponding author received different supports and comments for this work from the co-authors to improve the article. All authors have read and approved the manuscript for submission.

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Correspondence to Mandefro Seifu.

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Seifu, M., Haji, J., Keno, T. et al. Determinants of nonfarm livelihood diversification: evidence from farmers in Ilu Abba Bora zone, Southwestern Ethiopia. SN Bus Econ 3, 151 (2023). https://doi.org/10.1007/s43546-023-00520-6

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