The Impact of Education on Farm and Off-Farm Income in Rural Households of Ethiopia
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Date
2011-05
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Addis Ababa University
Abstract
This study analyses the impact of education on farm and off- farm income of rural households of
Ethiopia. The study is conducted to analyze how education of the household affects the labor
allocation and hence the income of the rural households of Ethiopia. Farm household model is
constructed to see how farm households allocate their time to farm and off-farm activities. The
Seventh round Ethiopian Rural Household Survey data, collected by the School of Economics,
Addis Ababa University, in collaboration with other organizations is used for analysis. The labor
allocation of the households in to farm and off- farm activities is affected by average education
of the household. In addition the household head’s education alone also affects labor allocation
of the household. As the households get more education, they reduce labor supply to farm and
increase it to off-farm wage employment. The effect of education goes beyond determining labor
allocation; it also affects farm and off--farm income. Even though education reduces labor
allocation to farm, its overall effect on farm income is positive. This finding suggests that
expanding education in rural increases farm income, though it reduces on farm labor supply.
Therefore, expansion of education in rural Ethiopia is important to improve farm income and
alleviate poverty.
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Keywords
Income in Rural Households of Ethiopia