Abstract:
The rural economy in developing countries usually characterized by an agrarian economy in which large number of the smallholder farmers are practice farming activities. However, agriculture as a sole livelihood activity is not sufficient to overcome the livelihood constraints in rural area. As a result, income diversification is considered as important strategy for livelihood improvement. Therefore, this study was aimed at analyzing the determinants of female-headed household participation decision in income diversification and its impact on their livelihood in Guduru district, Ethiopia. To do this research, both primary and secondary data were used. The primary data was collected through multi-stage sampling technique from 245 rural female-headed households through structural questionnaires. In addition to this, the secondary data was collected by reviewing relevant sources such as documents of the office of agriculture of the district and other relevant organizations. Descriptive statistics (mean, chi-square test, and t-test), Simpson index of diversity, and econometric models (Double-hurdle and Propensity Scores Matching) were used to analyze the data. The descriptive statistics result showed that the degree of income diversification was 0.27 which is low. This is because of different constraints like lack infrastructure, altitude of the society, adultness, lack of credit, and lack of awareness and training. Beside this, there were opportunities that motivate rural female-headed household to participate in income diversification from two side pull and push factors. The result of the Double-hurdle model showed that, except age, gender-based discrimination, distance from market center and annual average agricultural income other variable like education states, family size, Livestock ownership, and access of credit were positively affect income diversification in the first hurdle. The intensity of income diversification was negatively affected by age of the household, family size, livestock ownership and gender-based discrimination whereas positively affected by frequency of extension contact in the second hurdle. Moreover, Propensity Score Matching result indicates that income diversification was a significant and positive impact on income and saving of income diversifying female headed households. The study concluded that, participation of rural female-headed household into income diversification is one of the key valuable potential solutions to enhance livelihood indicators (income. consumption expenditure, and saving) in the study area. As a result, it is suggested that the government and all other stakeholders should focus on rising income source and further research should be conducted for a more holistic understanding of the significance of income diversification than specialization in rural area
