Rural income diversification in Ethiopia: Patterns, trends, and welfare impacts

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dc.creatorAbate, Gashaw T.
dc.creatorBachewe, Fantu Nisrane
dc.creatorRegassa, Mekdim D.
dc.creatorMinot, Nicholas
dc.date2022-12-02
dc.date2024-04-12T13:36:49Z
dc.date2024-04-12T13:36:49Z
dc.date.accessioned2026-06-27T15:15:25Z
dc.descriptionIncreased diversification of rural households into the rural non-farm economy is an important driver of economic growth and structural transformation in countries like Ethiopia where most people live in rural areas and are largely dependent on seasonal agriculture. In this study, we explore the patterns and trends of diversification and assess its drivers and welfare effects during the recent decade (2012 – 2019) using three rounds of representative household data collected from four major regions in Ethiopia. Our results show that sample households generally adopt a livelihood strategy dominated by farming and that the level of diversification has been stagnant over the period of analysis considered. More importantly, most households continue to draw a substantial share of their income from crop production, followed by livestock. The income from non-farm activities accounts only between 17-23% of the total household income. Upon exploring the link between diversification and welfare outcomes, we find that households with relatively diversified income sources have significantly higher consumption expenditure per capita, consume diverse diets, and live in house with better roof quality. Further analyses reveal that income diversification is positively associated with credit access, membership in social insurance, ownership of assets and wealth, and population density. Conversely, access to relatively large, fertile, and irrigable land discourages diversification. In sum, the results imply the need for a deliberate effort to expand the non-farm economy to tap its full potential for employment generation, income growth, and overall welfare improvements.
dc.formatapplication/pdf
dc.identifierhttps://hdl.handle.net/10568/140882
dc.identifier.urihttp://hdl.handle.net/123456789/99057
dc.languageen
dc.publisherInternational Food Policy Research Institute
dc.relationhttps://doi.org/10.1016/j.foodpol.2025.102978
dc.rightsOpen Access
dc.sourceAbate, Gashaw Tadesse; Bachewe, Fantu Nisrane; Regassa, Mekdim; and Minot, Nicholas. 2022. Rural income diversification in Ethiopia: Patterns, trends, and welfare impacts. IFPRI Project Note October 2022. Washington, DC: International Food Policy Research Institute (IFPRI). https://doi.org/10.2499/p15738coll2.136460.
dc.subjectincome
dc.subjectrural communities
dc.subjecthousing
dc.subjectconsumption
dc.subjecthouseholds
dc.subjectwelfare
dc.subjectwelfare economics
dc.subjectfarmland
dc.subjectagriculture
dc.subjectcrop production
dc.subjectpopulation density
dc.subjecteconomic diversification
dc.subjectassets
dc.subjectsocial security
dc.subjectlivestock
dc.subjectdiet quality
dc.subjectcredit
dc.subjecttrends
dc.titleRural income diversification in Ethiopia: Patterns, trends, and welfare impacts
dc.typeBrief

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Instituto Internacional de Investigación sobre Políticas Alimentarias (IFPRI)