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Income Dversification

In: Business and Management

Submitted By bassie
Words 322
Pages 2
Abstract
This study examines the determinants of household income diversification and its effect on food security status in rural Ethiopia. To accomplish this, we use household panel data from ERHS approximately 896 households for three years data with five years gaps. Analytical tool used were both descriptive statistics and econometric models. In descriptive analysis, from the sample households, the level of household income diversification in rural Ethiopia is 39%.Income diversification of households based on share of income from each sources show that, the share of crop income takes the highest share which accounts 45% of the total household income followed by livestock income which accounts 41% of the total income. The remaining 14% of the household income generates from off-farm activity.
In econometrics model, we use fixed and random effects models to remove the effect of unobserved household characteristics that may be correlated with household income diversification behavior. We also employed instrumental variable in combination of 2SLS to address the possibility of endogenity of the level of income diversification in food security status equation. To examine the determinants of level of household income diversification we used random effect model based on the Hausman test result. The regression result suggests that number of adult household members, access to credit, farm size and livestock holding determines the level of income diversification of households. Positively and significantly while age of the household head, distance from the nearest market, households with higher education and availability soil conservation on their plot determines negatively and significantly. Finally we analyzed the effect of the level of household’s income diversification on food security status. To this end, we deliberately used fixed effect model to sweep out time invariant unobserved factor that might be correlated with the instruments. The finding of the study revealed that income diversification of households should be given more focus and attention by policy makers in effort to reduce food insecurity status of households.…...

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