Does rural outmigration affect investment in agriculture? Evidence from Ethiopia

ABSTRACT

This paper investigates impacts of rural outmigration on household spending in agriculture. Empirical data come from two rounds of panel surveys of households living in three major regions of Ethiopia. Accounting for potential endogeneity of outmigration and selection bias using a combination of a difference-in-difference (DID) model and an inverse-probability of treatment weighting (IPTW) approach, we find that, on average, rural outmigration has significantly increased probabilities of spending on herbicide and livestock by 10 and 20 percentage points, respectively. At the intensive margin, we also find outmigration has significantly increased the amount of household spending on herbicide and livestock by around 62% and 246%, respectively. However, our findings suggest differential impacts of outmigration based on age of the household head, especially on the likelihood of purchasing livestock.

KEYWORDS:

• Ethiopia
• rural outmigration
• agricultural investment

Acknowledgements

The authors greatly acknowledge the Think-Tank Initiative of the International Development Research Center (TTI-IDRC) of Canada for funding the Research Project entitled ‘Migration, Remittances and Forest Dependence in Ethiopia: Implications for Food Security, Gender and Forest Conservation’ with Grant No. 108088-001, which provided the dataset we use for this paper. The authors also express their appreciation for the field surveyors and survey households and community focus-group discussants for participating in this study. The opinions expressed in this paper are those of the authors’ alone.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. For example, during 2015–2016 main agricultural season, the average national-level crop farm size per household was less than 1 ha (CSA, 2016).

2. In 2013, Ethiopia had around 80 million people (CSA, 2014).

3. In order to reduce problem of endogeneity, our estimation sample excludes households who already had a migrant in the baseline survey.

4. It is essential to note that this figure is only capturing remittances sent by migrants who were still away from home at the time of the survey.

5. Obtaining credit in Ethiopia is costly. According to Dercon and Christiaensen (2011), for instance, the implicit median interest rate of borrowing by farmers from formal sources in the country is estimated at 57%.

6. Birr is Ethiopia’s national currency. In 2016 and 2017, one USD was approximately equal to 21 to 22 Birr.

7. Since the continuous outcome variables are IHS-transformed, percent change $\left(p\right)$in the outcome variable resulting from a unit change in the treatment variable can be calculated using the following equation as given by Kennedy (1981): $p=\left[exp\left(\hat{c}-\frac{1}{2}V\left(\hat{c}\right)\right)-1\right]\mathrm{x}100$, where $\hat{c}$ is the estimated coefficient, $V\left(\hat{c}\right)$ is standard error of the estimate.

Additional information

Notes on contributors

Degnet Abebaw

Degnet Abebaw is a Development and Agricultural Economist. Currently, he is an independent researcher. Previously, he worked as a Senior Research Fellow at the Ethiopian Economic Policy Research Institute of the Ethiopian Economics Association. His research interests  include poverty reduction and food security, health and nutrition, migration, agriculture, program evaluation and policy analysis.

Assefa Admassie

Assefa Admassie is an Adjunct Associate  Professor of Economics at Addis Ababa University. Until recently, he has been the Executive Director of the Ethiopian Economic Policy Research Institute of the Ethiopian Economics Association. His areas of research include agricultural economics, child labor, education and health, impact evaluation, poverty and ICT. He is a board member of the PhD Collaborative Program of the African Economic Research Consortium (AERC) and a fellow of the Ethiopian Academy of Sciences.

Habtemariam Kassa

Habtemariam Kassa is a Principal Scientist at the center for international forestry research (CIFOR). His research interests cover forests and livelihoods, agro-forestry, gender, migration, and rural development.

Christine Padoch

Christine Padoch is an anthropologist and a  Senior Curator Emerita of the Institute of Economic Botany of the New York Botanical Garden. Previously she served as Director of the Forests and Livelihoods Program of the Center for International Forestry Research (CIFOR). Padoch has spent over 35 years carrying out research on smallholder patterns of  forest management, agriculture, agro-forestry and livelihoods.