Application of Double Hurdle Model in the Analysis of Determinants of Income Diversification and Its Intensity: Evidence from Gida Ayana District
Paper Details
Application of Double Hurdle Model in the Analysis of Determinants of Income Diversification and Its Intensity: Evidence from Gida Ayana District
Abstract
Diversification of income sources, assets, and occupations is often common practice for individuals or households in different parts of the world, but for different reasons. Although less productive, compared to modern sectors, the contributions of rural non-farm works to economic growth, rural employment, and poverty reduction. This study attempted to identify potential factors influencing non-farm income diversification in Gida Ayana district based on the data obtained from 196 rural households. Descriptive results depicted that 34.2% of the sampled households were engaged in non-farm works that are performed as a complement to agriculture part-time or during the agricultural off-seasons. An econometric result from the first hurdle model revealed that households’ participation in non-farm work is positively and significantly influenced by education of household head, number of oxen, access to credit and access to market information while negatively and significantly influenced by the use of fertilizer. Similarly, the second hurdle model result showed that the amount of income from the non-farm sector is positively and significantly influenced by the number of oxen and access to market information while negatively and significantly affected by distance to the nearest market and use of fertilizer. Based on the result, households in the study area are recommended to diversify the source of their income for their family need in addition to farm income since the proportion of non-farm income remains low. The effort of the local agricultural sector and development agents are also required to expand rural infrastructure.
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