Non-farm Entrepreneurial Activities and the role of Non-cognitive Skills in Agriculture. Theoretical framework and Empirical Evidence from Ethiopia.

The dissertation is articulated in three empirical applications which focus on the economic development of Ethiopian smallholders either on and off-farm from 2012 to 2016. The complete title of the thesis is “Non-farm Entrepreneurial Activities and the Role of Non-cognitive Skills in Agriculture. Theoretical Framework and Empirical Evidence from Ethiopia”. In fact, one of the earliest and most central insights of the literature on economic development is that development entails structural change. The countries that manage to pull out of poverty and get richer are those that are able to diversify away from agriculture and other traditional products. As labor and other resources move from agriculture into modern economic activities, overall productivity rises and incomes expand. However, the enhancing technologies developed by modern economic sectors may be reinvested on farm increasing the agricultural productivity too. The production on the farm side is analyzed in the first two papers of the thesis, while the third one focuses on the non-farm sector. The first two papers share the same data set which is a cross-section survey collected in two rural regions in Ethiopia during the crop year 2012. It was financed by the Food and Agriculture Organization (FAO), with the collaboration of the CEIS of the University of Torvergata and implemented by the University of Addis Ababa. The survey collected also non-cognitive skills of the 501 households in the survey using two well-known psychometric tests: the Big Five Inventory test and the Emotion Regulation questionnaire. These traits were used for the empirical estimation of the agricultural production function and the agricultural input equations in order to see how these traits affect productive and allocative efficiency in rural Ethiopia. Results show a statistical relevance of personality traits in affecting both production and input choice/application. Furthermore, when non-cognitive skills variables are explicated in the models is possible to confirm the “recursive structure” between output and inputs usage proposed by Zellner et al (1966). Namely, the use of the OLS technique for the production function estimation is (weakly) validated thanks to the explication personality traits variables in the model generally omitted in the neoclassical model specifications. The third paper analyses whether the economic activities off-farm in Ethiopia are the results of push or pull factors. We wanted to assess if households were attracted in these activities because of the remunerative opportunities or if they were pushed due to ex ante coping mechanisms. For the empirical application, we rely on longitudinal panel data “Living Standard Measurement Study- Integrated Survey on Agriculture” collected by World Bank (WB). We use the three rounds available (2011/2012, 2013/2014, and 2015/2016) to track households overtime. Furthermore, the empirical strategy relies on different kind of econometric techniques: cluster analysis, multivariate regressions and Heckman correction models. Then, we focused on the impact of household’s non-farm engagement on households’ wellbeing (consumption and agricultural input expenditure). Results show that push factors are the main drivers of households’ participation in the non-farm sector, and without further investments in infrastructure and education these activities are not likely to be the engine for further economic development in Ethiopia.