Analysis of Off-farm Engagements and Implications for Economic Transformation: Empirical Evidence from Libo Kemkem Woreda
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Date
2013-06
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Addis Ababa University
Abstract
Off-farm engagements and earnings from such employment opportunities have become
increasingly important in rural Ethiopia as the nation is striving to end poverty through a
steadily growing rural income. There is an expressed policy effort to materialize a more
stable and growing farm income. However, there is a paucity of policy attention to the
off-farm economy notwithstanding its huge potential in diversifying rural income,
reducing unemployment and transforming the rural economy. This study analyses offfarm
engagements by farm households to drive important implications for policy as farm
households’ behavioural choice matters for the desired/undergoing economic
transformation. Specifically, we estimate farm households’ propensity to and the
intensity of off-farm engagements using binary choice and censored regression models,
respectively. We use a survey data of 200 farm households in Libo Kemkem Woreda,
Amhara Region. Farm households’ socio-political capital, risk behaviour, financial
conditions, characteristics of their farm and local labour market conditions are found to
be significant predictors of the choice to off-farm engagements. On the other hand, wagerelated
household characteristics and human capital variables appeared less important in
explaining farm households’ choice to diversify into the off-farm economy. Likewise, a
significant relationship is found between the intensity of off-farm engagements (off-farm
days and earnings) and the indicators of socio-political capital, farm characteristics, risk
behaviour, financial conditions and labour market conditions. The results imply that offfarm
engagements have become permanent pursuits to efficiently husband farm and offfarm
income sources of farm households. Thus, the study calls forth a considerable
policy attention to the off-farm economy and more robust institutional arrangements to
enable farm households exercise informed choices for the desired/undergoing economic
transformation in the rural economy to flourish and sustain.
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Implications for Economic Transformation