Non-farm income and labor markets in rural Ethiopia. IFPRI/EDRI. Nov2016

Fantu Bachewe, Guush Berhane, Bart Minten, and Alemayehu Seyoum Taffesse

SYNOPSIS OF ESSP WORKING PAPER 90

Ethiopia’s economy is rapidly transforming. However, the extent to which this is affecting off-farm income and labor

markets in rural areas is not well understood. Based on a large-scale household survey in high potential agricultural

areas of the country, we find that total off-farm income (defined as wage and enterprise income) makes up 18 percent

of total rural income. Wage income in both the agricultural and non-agricultural sectors accounts for 10 percent of

total household income, equating in importance to livestock income. We show off-farm income and wage income to

be relatively more important for the poor and for female and youth-headed households. We further find that real rural

wages increased by 54 percent over the last decade, mostly driven by high agricultural growth. While this wage increase

is good news for the poor, it also induces adjustments in agricultural production practices, including increased

adoption of labor-substituting technologies, such as herbicides.