Does non-farm employment increase rural households' consumption in western Ethiopia? Empirical evidence from the horo guduru wollega zone

In rural areas where farming is the primary source of income for farmers, engaging in non-farm activities can provide an additional source of income and improve household consumption. However, several social and economic factors present challenges to the involvement of rural households in non-farm activities. This study aimed to examine the impact of non-farm participation on household consumption in rural areas.A multistage sampling method was used to select the sample households from the study area. Heckman's two-step procedure was utilized to analyze survey data obtained from 383 rural household heads. The results indicated that participating in non-farm employment had a positive and significant effect on household consumption levels. The result indicated that households that engage in non-farm activities had higher levels of consumption compared to those who do not participate in such activities. The study also identified several factors that influence household consumption in rural areas. These factors include education, access to credit, distance to market, TLU (Tropical Livestock Unit), membership in "iqub" (a social financial system), health status, non-farm training, and gender. It was found that gender disparities exist, with female-headed households experiencing lower consumption levels than male-headed households. Based on the findings, the research recommended addressing gender disparities and improving rural infrastructure, particularly in relation to enhancing health services, electricity supply, road transport, and education. Efforts should also be made to overcome the challenges related to access to training and credit. The study emphasized the significance of recognizing the impact of supporting existing social financial systems, such as iqub, in improving household consumption in rural areas.