Determinants of Rural Households’ Participation in Income Generating Activities in Central Region, Eritrea

Abstract

This study aims to identify and analyze the determinants of rural households’ participation in income generating activities in the Central region, Eritrea. Households’ level survey data was collected through a standardized, formal questionnaire from 202 randomly selected households in four villages. Five income generating activities and several independent variables are identified and  the probability that a given household participates in these income generating activities is estimated using probit technique. The result of the econometric analysis shows that the probability of participation in wage employment is related positively to age of head of household (HoH), risk, and average education of household (HH) members; while, rain-fed area owned, age of HoH squared have a negative effects. When we consider non-agricultural wage employment; sex of HOH, adult members in the HH and risk are related positively in contrast to the negative effects of distance to the nearest tarmac road and social capital index. Non-agricultural self-employment is another major source of income which is positively related to rain-fed area owned, age of HoH, dependency ratio, and distance to nearest tarmac road; and negatively to sex of HoH, possession of livestock, age of HoH squared and risk. Combining both non-agricultural wage and self-employments is categorized as off-farm and has a positive relationship with age of HoH, years of schooling of HoH, adult members in the HH, risk, average education of HH members and access to credit, while the effect of sex of HoH and age of HoH squared is negative. Finally, the probability of participation in agricultural self-employment (livestock production) has negative relationship with age of HoH squared, years of schooling of HOH and average education of HH members.  Based on the results of the econometric analysis, some policy recommendations are drawn with respect to activity diversification and rural development which can be helpful in rural poverty reduction.

Keywords: activity diversification, rural households, non-farm, off-farm, central-zone, Eritrea