Effect of off‐farm income on smallholder commercialization: panel evidence from rural households in Ethiopia |
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Authors: | Tesfaye Woldeyohanes Thomas Heckelei Yves Surry |
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Affiliation: | 1. Institute for Food and Resource Economics, Bonn University, Nu?allee 21, Bonn, Germany;2. Department of Economics, Swedish University of Agricultural Sciences, Uppsala, Sweden |
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Abstract: | This article investigates how off‐farm income affects crop output market participation decisions and marketed surplus of smallholder farmers in Ethiopia. A double‐hurdle model is estimated using three waves of panel data from the Ethiopian Rural Household Survey. Unobserved heterogeneity is controlled for using a correlated random effect procedure and potential endogeneity of explanatory variables using a control function approach. The results show that off‐farm income has no significant influence on household crop output market participation. However, conditional on market participation, additional off‐farm earnings negatively affect the marketed surplus. This indicates that farmers use off‐farm earnings for consumption rather than for investment in agricultural production. Policy measures that promote rural investment may help increase returns to labor for land‐poor households participating in off‐farm work in the process of agricultural commercialization. |
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Keywords: | C23 C26 Q12 Q13 Q18 Double‐hurdle Endogeneity Off‐farm income Smallholder commercialization Ethiopia |
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