Abstract:
The rural areas of Ethiopia are characterized by low nonfarm diversification and a high
deforestation rate. Because these problems are context-specific, this research aims to
analyze nonfarm livelihood diversification, participatory forest management and their
impacts on the welfare of smallholder farm households in the study area. The study used
cross-sectional data collected during 2020/21 production season from a sample of 380 farm
households drawn randomly and proportionally from six kebeles in three districts through
multistage sampling techniques. The data were analyzed using descriptive statistics and
econometric models, including double hurdle, fractional logit, binary logit and propensity
score matching. The nonfarm activity participants have more land, better access to market
information, nonfarm training, credit and less livestock than their non-participant
counterparts. The participatory forest management members have more livestock holdings,
social connections, good perception towards participatory forest management, received
more training and forest income than the non-members. The double hurdle model results
indicate that the decision to participate in nonfarm activities is positively and significantly
influenced by dependency ratio, access to market information, access to nonfarm training
and credit but negatively and significantly affected by livestock ownership. Moreover, the
level of nonfarm income is positively influenced by access to market information, livestock
ownership and attitude towards nonfarm activities but negatively and significantly affected
by the dependency ratio. The fractional logit model result reveals that economic dependence
on forests is negatively and significantly affected by ownership of garden coffee, distance to
the market and distance to the forest but positively and significantly influenced by ownership
of private plantations and household wealth/assets. The binary logit model result shows that
involvement in participatory forest management is positively and significantly influenced by
forest income, training, social networks, perceived benefits and rule enforcement, while it is
negatively and significantly affected by the education of the household head. The propensity
score matching discloses no evidence of welfare improvement due to engagement in nonfarm
livelihood diversification and participatory forest management. Based on the findings, the
study suggests that the government and other stakeholders should promote access to market
information, nonfarm training, credit and create awareness about the importance of
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nonfarm activities to strengthen rural nonfarm diversification. Moreover, the expansion of
garden coffee should be enhanced to minimize destructive forest dependence while the
promotion of forest income and social ties should be used to improve households’
engagement in participatory forest management