Measuring Smallholder Commercialization Decisions and Interactions in Ethiopia

Abstract

This paper measures the market orientation in land allocation, crop choices and commercialization of smallholders in rural Ethiopia and estimates their intensity and interaction at agricultural enterprise levels. It employs different relevant econometric estimation techniques including seemingly unrelated regression (SUR), Tobit model, univariate and seemingly unrelated bivariate probit models. The results indicated that households’ land allocation and crop choices between staples and cash crops were strongly and negatively correlated, suggesting that production of staples and cash crops were competing for limited resources but their crop choices were determined by similar underlying covariates. Moreover, crop and livestock commercialization scales were strongly and positively correlated, implying that the scale of commercialization in one enterprise enhanced commercialization in the other and households’ scale of commercialization in the two enterprises was determined by common underlying factors. However, their crop and livestock commercialization status were independent and their determinants were basically different.

Key words: Market orientation, crop choice, commercialization, SUR model, bivariate probit.