Wellbeing, productivity and food security effects of multiple livelihood diversifications: Insight from kaffa zone, Ethiopia

Even if agriculture is the dominant livelihood base for most Ethiopians, currently the sector is facing many challenges. Hence, rural households are compelled to develop livelihood diversification strategies to cope with the increasing vulnerability associated with agricultural production. The current study therefore assessed the wellbeing, productivity and food security effects of multiple livelihood diversifications on smallholder farmers of kaffa zone, Ethiopia. To do so, econometric tools, such as multinomial logit and multinomial endogenous switching regression model were used to assess factors that affect rural households’ livelihood diversification choice and to evaluate their impact on various welfare indicators, respectively. The findings show that isolated participation in non-farm livelihood diversification results in a significant effect on smallholder farmers’ wellbeing and productivity, but it does not have a significant effect on food security. Furthermore, joint participation in both diversification strategies results in a significant effect on smallholder farmers’ productivity and food security, but it does not have a significant effect on wellbeing. The only livelihood diversification package that has a significant effect on wellbeing, productivity, and food security simultaneously is the first combination, that is, lone participation in off-farm diversification. Thus, to maintain the wellbeing, productivity, and food security of smallholder farmers simultaneously, the study recommends concentrating on off-farm livelihood diversification portfolios rather than the other combinations. Therefore, policymakers and rural finance programs should shift their focus and place a greater emphasis in incentivizing smallholder farmers to invest in diversification strategies that can boost wellbeing, productivity and food security simultaneously, which is off-farm diversification.