Essays on Responding to Climate Change, Social Protection, and Livelihood Diversification in Rural Ethiopia

The nexus between the environment and development is often analysed through the sustainable livelihoods framework and within this framework, livelihood diversification has dominated much of the literature on sustainable livelihoods in the late 1990s and early 2000s (see Tacoli, 1998; De Haan, 1999; Ellis, 2005). This literature shows that agriculture is not the only source of livelihood for rural people in developing countries and diversifying into non-farm activities is increasingly adopted as a viable livelihood strategy and growing in its importance. Since then however, diversification seems to have lost favour in both the academic and policy discussions. Recently, with climate change and the recognition of its adverse impacts on livelihoods at the forefront in the developing world, there is a revival of interest and discussion on diversification as one of the main strategies by which rural people can respond to the challenges of climate change. This thesis is an effort to document local ways of responding to the impacts of climate change and how existing policy instruments at macro and meso level mainly social protection schemes contribute to the efforts already undertaken by individual households at micro level. In view of this, the thesis contains four studies which provide theoretical and empirical analysis on non-farm diversification and the role of the Productive Safety Net Programme (PSNP) in climate change adaptation in rural Ethiopia. The first study discusses the perceptions of smallholders’ towards climate variability and change as well as local adaptation strategies based on a case study of two districts in Northern Ethiopia. The study makes use of primary data gathered from focus group discussions and in-depth interviews with farmers and secondary data on key climate variables–rainfall and temperature and compares farmers’ perceptions with climate records. The results show that farmers perceive changes in their local climate and their overall perception matches with the results from rainfall and temperature trend analysis. The study also reveals that the greatest impact of these changes in rainfall and temperature are felt on the subsistence farming, which is already hard-pressed to meet the ever-inextricable challenge of food insecurity. Smallholders are also found to employ farm-level adaptation strategies combined with diversification. However, the current level of diversification appears to be dominated by natural resource-based strategies that may not be sufficient to deal with the impacts of current climate variability and expected changes. The second study uses the Ethiopian Rural Household Survey (ERHS) over the period 1994–2009 to analyse the factors that determine participation and returns from non-farm activities in rural Ethiopia. This study uses both the number of activities and income to measure non-farm diversification and estimates a range of micro econometric models. The results suggest that many of the variables that determine non-farm diversification belong to pull factors and are therefore a reflection of accumulation strategies. Despite this dominant pattern, however, it is likely that the poor are also diversifying into non-farm activities to earn income during agricultural off-seasons to smooth consumption. The third study examines the impact of non-farm income diversification on income distribution and poverty using Gini–coefficient decomposition, fixed effects and probit models. These analyses reveal that non-farm income diversification has a positive impact on rural households’ welfare and income distribution. This result strengthens the argument that non-farm income diversification can be a good strategy to lessen agricultural risks. The fourth study uses a sub-sample of the ERHS for the period 2004 and 2009 to examine the impact of the Productive Safety Net Programme (PSNP) as the main social protection scheme on household non-farm income diversification as an adaptation strategy to climate change. This is an impact evaluation study that employs the Difference-in-Differences approach combined with Propensity Score Matching for a panel of 1306 rural households. The results indicate that receiving transfers from the PSNP, on average increases income from non-farm activities and confirms the hypothesis that social protection can promote positive adaptation strategies and serve as effective means of reducing the vulnerability of smallholders to climate change induced shocks.