Non-farm Activities and Production Decisions of Farmers: The cases of Damotgale and Kachabira weredas in Southern Region of Ethiopia

This study examines the influences of non-farm activities on the production decisions of farmers and the determinants of non-farm activity in Damotgale and Kachabira weredas of the Southern Region of Ethiopia. The study is motivated by the belief that the constraints of the farm sector cannot be overcome by concentrating on the farm sector alone; inter-sectoral issues and farm and non-farm linkages need to be addressed as well. The study uses individual data from a household survey to provide background information and investigate six testable hypotheses. The analysis is carried out by separately estimating regression models for various production decisions and undertaking target variable comparison among different non-farm income groups. The study finds that the farm sector in the study sites is characterized by shortages of land, low yield of crops, shortages of draught animals and lack of grazing land. This has led to the conclusion that the farm sector is not adequate to support the high density of population in the study areas. Farmers in the study areas have shown a higher involvement in non-farm activities. Trade and handicraft activity are the two main types of non-farm activities in the study areas. The group comparison of the household members showed that there are significant differences in different production decisions among the different non-farm income groups. The regression models showed that for farmers participating in non-farm activity, non-farm income positively influences the amount of cultivated land, input usage, cash crop production and income from sale of crops. The relationship, however, was not born out for the total sample of the population in which farmers with non-farm income were included. This group of farmers has displayed better production decisions due to their better farm and easily liquidable resources. Among the determinants of non-farm activity, education has shown a positive and significant influence on non-farm income. The implication of the study for agricultural and rural development is that as the non-farm sector strongly contributes to the improvement of the farm sector, rural policies should aim at promoting the farm and non-farm linkages by strengthening non-farm activities in rural areas. Education can be used as one of the effective instruments in promoting non-farm activities in rural areas.