Abstract:
Rural farm households face an increasing challenge looking for alternative income sources to
supplement their small scale agricultural activities. To this end, this paper examines the
determinants of income diversification among rural households using cross sectional data
collected from Tulo District of Western Hararghe Zone, Ethiopia. Both primary and
secondary data were collected from different sources. The data were obtained from 120
sample household heads that were selected through a combination of two-stage sampling
techniques. Descriptive statistics were used to identify the income diversification strategies
and the households income sources. Bivariate probit model was employed to analyze the
determinants of households income diversification. Result of descriptive analysis indicate that
much of the rural households (67.5%) in the study area did not practice diversified income
strategies due to different factors. Only 32.5% of the sampled households diversify their
income form farm and off/non-farm activities. Moreover, inadequate knowledge/skill and
initial capital are the major factors that influence the households diversification status.
Econometric analysis demonstrated that out of the total fifteen variables included in the
model only seven variables including age of household head, household family size,
household land size, household yearly expenditure, access to market, urban linkage and input
application were found to be the significant determinants of income diversification. The
results of this study suggest that both agricultural intensification and off/non-farm
diversification should be strengthened to attain smallholder households’ livelihood security
