DETERMINANTS OF INCOME DIVERSIFICATION AMONG RURAL HOUSEHOLDS IN TULO DISTRICT, WEST HARARGHE ZONE, OROMIA NATIONAL REGIONAL STATE ETHIOPIA

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