Determinants of Rural Livelihood Diversification among Small-Scale Producers: The Case of Kamba District in Ethiopia

This paper analyzes the determinants of off-farm participation for households in rural Ethiopia using cross-section data collected from 200 small-holder farming households in rural areas of Kamba district. Descriptive analysis and probit regression model using marginal effect was employed to analyze the determinants of household participation in different off-farm activities. On average, about 52% of all households sampled participate in off-farm activities and off-farm income accounts for 30% of total household income. Agricultural product marketing is the dominant source of off-farm income, accounting for almost overall household off-farm income. The results shows that a hectare increase in farm size will decrease the probability of off-farm participation by 0.135 and one unit increase in animal wealth of the household measured in TLU, will decrease the probability of off-farm participation by 0.037. In addition, an Ethiopian Birr increase in family income will decrease the probability of off-farm participation by 0.0002 and a kilometre increase in the market distance will decrease the probability of off-farm participation by 0.0041. Expectedly, saving and family size are positively related to off-farm participation. A one Birr increase in saving will increases the probability of off-farm participation by 0.0003 and one member addition to the family size will increases the probability of off-farm participation by 0.033.