Abstract:
Diversification of income activity is the process by which households broaden and increase their income base by adopting new economic activities. The purpose of this study was to assess the determinants of rural households’ participation in income diversification activities in the Sodo-Buee district of Gurage Zone, Southern Nation Nationality People Region Ethiopia. The study was based on primary data collected from 192 samples selected at random using a household survey questionnaire. Additional information was also obtained from focus group discussions, key informant interviews, and personal observation. The data has been analyzed by descriptive statistics and econometric model (multinomial logistic regression) using SPSS and STATA software. Qualitative data was used to substantiate the responses of the questionnaire. The descriptive statistics result pointed out that about 48.25% of sample respondents depend solely on on-farm activities; 18.8% of households rely on on-farm + off-farm activities; 21.68% of households depend on on-farm + non-farm activities, and 11.19 % rely on combined on-farm activities with non-farm and/or off-farm activities to achieve their livelihood. The results from multinomial logistic regression confirmed that educational level, total annual income of the household, access to credit service, and membership in a cooperative were found to influence households’ income diversification activities positively and significantly. The dependency ratio of the household, total land holding, and distance from the nearest market was found to be negatively and significantly influenced by rural households' income diversification activities. It is recommended that the government promote economic and social institutional support, as well as create a favorable environment for emerging income diversification activities such as non-farm and off-farm activities, in order to increase the income of rural households
