A leisure or livelihood strategy? Understanding nonfarm activities and income effects in rural Ethiopia

Nonfarm income serves as a vital livelihood strategy for both farm and nonfarm households around the world. While there is a substantial body of research addressing the challenges of engaging in nonfarm activities, studies linking nonfarm employment to livelihood outcomes remain limited. This study aims to identify the determinants influencing participation in nonfarm livelihood activities and their impact on the income of rural farm households in the East Dembia district of Northwestern Ethiopia. Our findings reveal that factors such as training and education, along with larger family sizes, encourage participation in nonfarm activities. Conversely, having extensive land holdings, a significant number of livestock, and greater distances from the main road tend to discourage participation. According to the results of our propensity score matching analysis, nonfarm livelihood activities significantly contribute to household income. Additionally, enhancing training and education opportunities, along with improving infrastructure like road networks, can further boost the participation of rural farm households in nonfarm activities.