IMPACT OF LAND RENTING-OUT ON WELFARE OF RURAL HOUSEHOLDS: THE CASE OF DUGDA WOREDA, OROMIA NATIONAL REGIONAL STATE, ETHIOPIA

Abstract

In a society where the vast majorities derive their livelihood from traditional agriculture, the resource competition will be particularly on agricultural land. In countries like Ethiopia where sales of agricultural land are prohibited by proclamations, land rental market is a less costly and flexible land transaction system that allows efficient producers who have comparative advantage to rent-in land as a substitute to land market. However, it might also lead to concentration of land and could increase poverty in the rural areas. In this study, therefore, empirical measurement of poverty and evaluation of impact of land renting-out on the participant households’ welfare that are living in Dugda woreda was made. The analyses were done using cross-sectional data collected from 200 sample households selected using simple random sampling; consisting 100 participant and 100 non-participant households. The three FGT indeces were used to measure poverty and PSM method was employed to evaluate the impact of land renting-out on the welfare of the sample households using consumption expenditure as a welfare indicator. The result revealed that 26.4 percent of the non-participant and 29.8 percent of the participant households were found to be poor. Estimated average treatment effects from PSM results were showed that the consumption expenditure of the participant households were significantly less than that of the non-participant households, which evidenced that the welfare differences between the two groups were mainly from participating in land renting-out. Hence, identification of the factors that force farmers to rent-out their land and acting accordingly to help them to operate on their own farm is crucial to help farmers get out of poverty and enjoy a better livelihood