Weather Risk and Household Participation in Off-farm Activities in Rural Ethiopia

This study examines the effects of weather shock on households’ decision to engage in different types of off-farm work in rural Ethiopia. A multinomial logit model is applied to household data collected in 1999 and 2004. The regression results show that the level and variability of rainfall has a significant effect on the decision by households to engage in any type of off-farm work. The probability of a household deciding to participate in low-return, off-farm activities increases with lower levels and higher variability of rainfall, suggesting that households engage in those activities as a strategy for coping with adverse weather shock. Contrary to this, we find that participation in high-return activities increases with the level of rainfall and tends to decrease with rainfall variability, suggesting a strong correlation between off-farm activities and agricultural production.