Abstract

The agriculture sector is the most important segment in the Ethiopian economy. This is because of its contribution to the national GDP (38.8%), where crops account for 27.4%, and it employs 73% of the total population. Despite efforts made to transform Ethiopian agriculture from subsistence to commercial-oriented agriculture, the sector’s performance has been below expectations. In order to overcome low productivity and uncertain farm income, farm households participate in off-farm activities to generate additional income to support their livelihoods. Participation in off-farm activities shares labor from agricultural activities and, on the other hand, it creates income for further farm investment. Does the rising participation in off-farm activities drive agricultural productivity or hinder productivity? Hence, this study seeks to address and generate information on the impact of participation in off-farm activities on cereal productivity in the central area of Ethiopia. Field surveys were conducted during the 2021 cropping season on a total of 392 sample farm households that were randomly drawn from eight Kebeles in three districts selected through a multi-stage random sampling technique. The data were analyzed using descriptive statistics and econometric models like endogenous switching regression. The endogenous switching regression results confirmed the presence of negative selection bias. It shows that participants' households are associated with lower cereal productivity compared to households solely focused on farming. Participant households could be more productive if they did not participate in off-farm activities. These findings have important implications for policy design. Extension services should focus on promoting efficient input use and best management practices among off-farm participants to maximize the returns from their investment in improved inputs and also make them efficient and profitable in business activities.            

Key words: Off-farm participation, total factor productivity, cereal crop, endogenous switching regression.