Rural livelihood portfolios and determinants of livelihood diversification among rural households in North-Western Ethiopia

In Ethiopia, over the past decades, researchers in the field of rural development have tended to agree that the number of poor people in rural areas of Ethiopia exceeds the capacity of agriculture to provide sustainable livelihood opportunities. Thus, despite the persistent image of Ethiopia as a country of subsistence farmers, over the past decades, there has been an outstanding tendency for rural economic diversification. Thus, the aim of this study is to characterize rural households’ livelihood portfolios and examine the major determinants of income diversification in the study area. The study employed a sequential embedded research design. To evaluate the level of household livelihood diversification, the Simpson Diversification Index (SDI) was used. Censured regression models were also employed to identify the major determinants of livelihood diversification. The findings of the study revealed that households in the study area depend on a variety of livelihood portfolios. Diversification into off-farm sources contributed 35% to total household income. The result also indicated that household livelihood diversification is significantly determined by household head educational status, access to training, age, family size, livestock ownership, land ownership, the proportion of infertile land, access to roads, and agro ecology at less than 5% probability level. As a result, the traditional sector-based approach should be broadened by adopting and implementing a local development strategy that includes both farm and non-farm activities.