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Understanding livelihood strategy-poverty links: Empirical evidence from

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Article  in  Environment Development and Sustainability · June 2011

DOI: 10.1007/s10668-010-9276-2

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Environ Dev Sustain (2011) 13:547–564
DOI 10.1007/s10668-010-9276-2

Understanding livelihood strategy-poverty links:

empirical evidence from central highlands of Ethiopia

Ali Mohammed Oumer • Andreas de Neergaard

Received: 15 June 2010 / Accepted: 27 November 2010 / Published online: 15 December 2010
 Springer Science+Business Media B.V. 2010

Abstract The aim of this paper is to disclose livelihood strategy-poverty links and gain a
better understanding by developing typologies of rural households. Based on qualitative
and quantitative data, we group households into different typologies and explore interac-
tions. We identified six main agronomic strategies, four dominant livelihood diversification
strategies, and income quartiles (proxies for poverty) using cluster and principal compo-
nent factor analysis. We found that nearly 82% of the surveyed farmers in the study area
belong to the bottom income quartiles while about 18% are on the upper quartiles.
Households in the bottom income quartiles engaged in casual off-farm work and cereal-
dominated livelihood strategies that tend to pursue subsistence farming by growing cereals
and oil crops. Contrarily, farmers in the upper income quartiles adapted intensive agro-
nomic strategies by integrating root crops, legumes, and vegetables with livestock. This
was largely attributed to access to key livelihood assets such as land, livestock, education,
and institutional support in which the upper quartiles were more endowed. Improving
availability of the key assets for the bottom income quartiles might be a way out of poverty
and ensuring sustainable development. It is crucial to recognize local-level heterogeneities
of rural households when targeting development interventions.

Keywords Poverty
Income quartiles
Livelihoods
Assets

Agronomic strategies
Ethiopia

Readers should send their comments on this paper to BhaskarNath@aol.com within 3 months of publication
of this issue.

A. M. Oumer (&)
Department of Agricultural Economics, Research Extension and Farmer Linkage (AEREFL)
Coordination, Ethiopian Institute of Agricultural Research, Holleta Research Centre,
P.O. Box 2003 Addis Ababa, Ethiopia
e-mail: alioumer@gmail.com

A. de Neergaard
Department of Agriculture and Ecology, Faculty of Life Sciences, University of Copenhagen,
Denmark, Thorvaldsensvej 40, 1871 Frederiksberg C, Denmark
e-mail: adn@life.ku.dk

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548 A. M. Oumer, A. de Neergaard

1 Introduction

Ensuring sustainability and international development goals in regions of extreme poverty

with a resource base prone to degradation, is one of the most challenging policy issues
today (Poole et al. 2007). Integrated approaches to sustainable development that recognize
the links between social and economic development, and environmental protection are
given a high priority to reverse the challenge (Laye and Gaye 2008). But poor farmers
continue to depend on natural resources for their livelihoods to meet short-term needs
rather than long-term sustainability goals (Okello et al. 2009). There is a need to under-
stand livelihood-poverty links that recognize heterogeneity at community and household
level to achieve sustainability goals (Poole et al. 2007).
The issues of poverty, livelihoods of poor people, and development policies are all
linked to the concept of sustainability containing environmental, economical, and social
aspects (WCED 1987; Poole et al. 2007). The links between development, resource base,
and the concept of sustainability are traced back through the Brundtland report (WCED
1987). There is now much theoretical evidence linking rural livelihood strategies, often
dependent on natural resources with the concepts of poverty and sustainability (e.g. DfID
1999; Scoones 2005; Shiferaw et al. 2007). Many cases that show links between poverty,
livelihood, and sustainability largely depend on location-specific conditions and farmer
characteristics (Poole et al. 2007; Okello et al. 2009). This requires empowerment,
inclusion, and socio-economic and sustainable development policies with relevance to
marginalized communities (Poole et al. 2007).
Several case studies have shown links between household livelihood strategies, poverty,
and resource use patterns (e.g. Freeman et al. 2004; Shiferaw et al. 2007; Liyama et al.
2008; Babulo et al. 2008). For example, livelihoods can be based on market oriented or
subsistence types of farming; the latter are often associated with less potential to escape out
of poverty and much dependent on the natural resource base (e.g. Babulo et al. 2008;
Liyama et al. 2008). In this case, negative livelihood outcomes (high level of poverty,
depleting the resource base, food insecurity, etc.) worsen the future of the poor leading to a
‘‘downward spiral’’ (Scherr 2000; Niehof 2004).
Livelihood strategies and outcomes at household level depend to a large degree on the
amount and qualities of livelihood assets owned or controlled by the household (McDonald
and Brown 2000; Scoones 2005; FAO 2008). Studies have shown discrepancy of asset
endowments among the ‘better offs’ and the poor, which is a function of locally governing
institutions and policies. For example, Cramb et al. (2004) showed that there is skewed
access to resources (labour, land, livestock, etc.) from the poor to better off farmers in a
study conducted in central Vietnam. Thus, application of manure was increasing to the
direction of the better off farmers while off-farm labouring and cash shortages were to the
direction of the poor (Cramb et al. 2004). In Tanzania, poverty was strongly associated
with lack of land and livestock as well as inability to diversify to non-farm alternatives
when farm opportunities are diminishing (Ellis and Mdoe 2003). The role of leadership and
elites (access to social capital) in controlling livelihoods and environmental benefits has
been observed where there are more lucrative enterprises in Kenya (Okello et al. 2009).
The optimal combination of investments in five forms of assets (human, natural,
physical, financial, and social) is a necessary condition for sustainable rural development
that thrives to achieve positive livelihood outcomes (Reardon and Votsi 1995; Pender
2004). In this light, grassroots-level strategies are required to overcome negative livelihood
outcomes to meet local community livelihood needs (Okello et al. 2009).

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Understanding livelihood strategy-poverty links 549

Numerous studies have pointed out the importance of diversifying the existing liveli-
hood activities to augment income rather than mere specialization to improve livelihood
outcomes (e.g. Ellis 2000; Brycesson 2002; Freeman et al. 2004; Ellis and Freeman 2004;
Liping et al. 2008). Other studies however emphasize holistic ecosystem management
(Yekinni and Okunade 2007), community driven commercialization (Okello et al. 2009),
and improving entire livelihood portfolios (Brooks et al. 2008) for enhancing sustainable
rural livelihoods.
Several authors have developed household/farm typologies to understand these broad
issues. For example, some studies used agricultural resource endowment for creating
typologies (e.g. Orr and Mwale 2001; Cramb et al. 2004; Ncube et al. 2009) but were
criticized for not considering off-farm income which is steadily increasing and becoming
an important component of rural livelihoods (e.g. Brycesson 2002; Freeman et al. 2004;
Ellis and Freeman 2004; Morera and Gladwin 2006). Income quartiles were used to
understand the nature of poverty/income and livelihood strategies in some African coun-
tries (e.g. Abdulai and CroleRees 2001; Ellis and Freeman 2004). Others used combination
of resource endowment and other proxy indicators for production orientation, main con-
straints, main income source, occupation, and access considerations (e.g. Smith et al. 2001;
Tittonell et al. 2005), while these combined methods were comprehensive but criticized for
being too complex to identify target typologies (Liyama et al. 2008). Bhandari and Grant
(2007) used livelihood activities to investigate livelihood security but were criticized for
not explaining the nature of both on-farm and non-farm activities (e.g. Liyama et al. 2008).
Recent studies used contribution of income sources to total gross income to develop
household typologies (e.g. Babulo et al. 2008; Liyama et al. 2008; Kamanga et al. 2009).
New insights like asset-based approaches that look beyond income are emerging to
understand livelihood strategies and poverty dynamics in rural areas (e.g. Kristjanson et al.
2009; Van den Berg 2010).
While much of the previous research has focused on income to develop target typol-
ogies, the existence of different tradeoffs between cost effectiveness, study context, level
of detail, and complexity in developing such typologies should not be undermined. Thus,
the aim of this paper is to provide empirical evidence on the links between livelihood
strategies and poverty using a combination of typologies, identified from a range of income
sources, assets, and agronomic strategies from an Ethiopian rural livelihood context. This
should contribute to a consistent and better understanding on the sustainable rural liveli-
hoods to support development policy tools aimed at targeted interventions recognizing
rural household heterogeneities.

2 Research methodology

2.1 The study areas and sampling

The study areas are located in the central highlands of Ethiopia (Fig. 1). The highlands host
the most diverse type of livelihoods of rural people in Ethiopia. ‘Guder’ and ‘Jeldu’
districts were chosen for this case study. We chose the two districts purposively to capture
as much livelihood heterogeneity as possible (both on-farm and off-farm activities) owing
to the differences in ecology (midlands vs. typical highlands), accessibility, previous
institutional interventions, infrastructures, bio-physical and socio-economic aspects, and
farming systems (rain fed vs. irrigated). This was done in consultation with local experts
after a thorough review of secondary information/data in the region. Guder district is

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550 A. M. Oumer, A. de Neergaard

Fig. 1 Map of the study areas

120 km from the capital city Addis Ababa, on the highway to the west. Its altitude ranges
from 1,900 to 2,000 m.a.s.l. and is characterized as midhighlands with diverse crops. Main
crops include cereals (‘tef’, wheat, and maize), oil crops (Niger seed), legumes (chickpea,
grass pea, and lentil), vegetables (tomato, onion, and cabbage), and root crop (sweet
potato). Jeldu district is also about 120 km west of the capital but has a 40-km feeder
gravel road to the highway. It is typical highland (up to 2,800 m.a.s.l.) with fewer types of
crops but more livestock compared to Guder. Main crops include cereals (barley, wheat),
root crop (potato), legumes (faba bean, field pea), oil crop (linseed), and perennial crop
(eucalyptus).
We used purposive and random sampling procedures. We selected two peasant asso-
ciations (PAs) purposively from the two districts to capture agro-ecological representation
(midland and highland) which is also linked to livelihood strategies and farming system,
degree of institutional intervention, and biophysical and socio-economic differences. Each
of the PAs covers three villages. We conducted a household survey on 179 farmers
(managing a total of 817 parcels of land) drawn from a population of 1,780 farmers using
proportional simple random sampling across six villages (Table 1). The survey was con-
ducted between December and March 2008, and all households who own land and pay tax
for land were the sampling frame. Our survey focused to gather data on income earning
activities, crop-livestock portfolios, landholding, resource use strategies, access to major

Table 1 Sampling procedure in the study areas

Selected peasant associations (PAs) Guder (1,230 households) Jeldu (550 households)

Selected villages ‘Quilinto’ ‘Degafille’ ‘Tulidimtu’ ‘Chilanko’ ‘Alle’ ‘Fello’

No. of households in each villages 340 550 340 150 250 150
No. of sampled households 32 48 29 20 34 16
Average walking distance to nearby 34 34 67 74 47 65
market (minutes)

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Understanding livelihood strategy-poverty links 551

Vulnerability context
Livelihood/Capital assets
(Human, natural, physical,
financial and social
capitals)
(Shocks, trends, seasonality)
Livelihood outcomes
Livelihood strategies
Livelihood diversification Poverty (+ -)
(High return/winning vs. low Vulnerability (+ -)
return/losing) Food security (+ -)
Agronomic strategies Resource use (+ -)
(Market-oriented/intensification vs. Sustainability of
subsistence/extensification) resource base (+ -)

Policy and institutional context

(Polices and institutional process)

Fig. 2 Sustainable livelihood conceptual framework: adapted from DfID (1999); Scoones (2005)

agricultural technologies, and institutional access. Moreover, qualitative methods such as

semi-structured interviews and participatory activities were used to augment the household
survey both in designing and discussion of the results.

2.2 Analytical framework

We link smallholder livelihood strategies with poverty using the sustainable livelihood
framework (Fig. 2). Livelihood strategies here combine agronomic strategies (e.g. agri-
cultural intensification vs. extensification) and livelihood diversification (Scoones 2005).
Global changes/markets, macro policies, and detailed institutional innovations were not the
focus of this study although literature acknowledges them to influence livelihoods, poverty,
and sustainability (DfID 1999; Shiferaw et al. 2007). The framework shows that with good
livelihood assets farmers may undertake better resource use practices (e.g. market-oriented
agronomic strategies or intensification) and pursue high return/winning livelihood strate-
gies that lead to positive livelihood outcomes (DfID 1999; Scoones 2005; Shiferaw et al.
2007; Liyama et al. 2008). Looking the other way around, improved livelihood outcomes
(less poverty, reduced vulnerability, better food security, and sustainable natural resource
base) enhance the stock of capital assets that may be used for profitable farming as well as
natural resource management (NRM) afterwards (Shiferaw et al. 2007). These forward and
backward linkages show the interplay between the different components of the framework
that tend to be dynamic and contextual.

2.3 Data analysis

We used three multivariate data reduction techniques (Johnson and Wichern 2002) to
develop farm/farmer typologies as our household and plot-level data had too many vari-
ables. First, we developed dominant livelihood diversification strategies based on per-
centage of income sources1 to total annual gross income using cluster analysis as outlined

1
Crop portfolios: cereals (‘tef’, maize, sorghum, barley, wheat); vegetables (tomato, onion, cabbage); root
crops (potato, sweet potato); legumes (faba bean, field pea, chick pea, lentil, grass pea); perennials (euca-
lyptus); oil crops (linseed, Niger seed); livestock income (aggregated together from all animal types); off-
farm income: casual (daily labour, petty trade, brokering, selling grass, selling fuel wood including animal
dung); regular (grain trading, fattening, selling drinks, kiosks, livestock trade, motorized grain mills, handy

123
552 A. M. Oumer, A. de Neergaard

Table 2 Dominant livelihood diversification clusters in the study area (n = 179)

Income portfolios Cluster 1 Cluster 2 Cluster 3 Cluster 4

No. (%) of households 41 (23%) 26 (15%) 69 (38%) 43 (24%)

Contribution of each source to total income (%)
Cereals 50 0 8 2
Vegetables 1 0 25 0
Root crops 1 1 2 48
Legume crops 16 2 3 2
Oil crops 19 2 1 3
Eucalyptus 0 0 0 23
Livestock 6 3 24 8
Regular off farm 5 5 32 9
Casual off farm 1 60 4 3
Remittance 0 21 0 2
Land rental 0 6 0 0
Mean annual gross income (ETB) 4,387 4,435 5,399 12,473

The bold values indicate income sources that contribute most to total gross income

by Liyama et al. (2008). We identified four dominant clusters using this method (Table 2).
Cluster 1 is characterized as a ‘cereal-dominated livelihood diversification strategy’.
About 50% of annual gross income is obtained from selling of cereal crops, 19% from oil
crops, and 16% from legumes. Cluster 2 can be described as specialized in casual off-farm
work. About 60% of their annual income is derived from casual off-farm work mainly
daily labour, 21% from remittance, and 6% from renting out of land. On average, their
annual gross income is ETB2 4,435 or U.S. $403. Cluster 3 is characterized as ‘integrated
strategy, i.e. regular off-farm-vegetables and livestock’. This group derives 32% of annual
income from regular off-farm income, 25% from sale of vegetables, and 24% from sale of
livestock. On average, farmers in this group derive relatively higher livestock income
compared to the others. The group derives mean annual gross income of ETB 5,399 or U.S.
$491. It can also be described as ‘market oriented’ by combining both on-farm and off-
farm activities. Cluster 4 can be described as ‘specialized in root crop activities’. On
average, their annual gross income is ETB 12,473 or roughly U.S. $1,134. About half
(48%) of their annual income is derived from root crops mainly potato, integrating it with
eucalyptus income (23%), and diversifying into regular off-farm income (9%). This group
is considered as ‘market-integrated’ farmers as they are well linked to potato seed business
in the highlands of ‘Jeldu’ compared to the other cluster groups.
Second, we divided the 179 farmers into income quartile groups using total gross
income of each farmer using cluster analysis. We used income quartiles as proxies for
poverty although poverty is multidimensional and complex.

Footnote 1 continued
craft, salaried employment); remittance; land rental income: income generated by renting out land. Gross
revenues from crops or livestock products sold were estimated following the approach of Liyama et al.
(2008). The same applies for off-farm work as it was difficult to estimate costs incurred to earn off-farm
incomes.
2
The exchange rate during the study period was 1USD = 11ETB (Ethiopian Birr).

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Understanding livelihood strategy-poverty links 553

Table 3 Principal component factors (PCs) extracted to represent main agronomic strategies in the study
area
Standardized Z scores 6 major components extracted

PC1 PC2 PC3 PC4 PC5 PC6

Land use types

Cereals -0.42 0.73 -0.43 0.03 -0.27 -0.11
Legumes -0.01 -0.10 0.70 0.21 -0.10 -0.26
Oil crops 0.27 0.18 0.10 0.21 0.24 0.81
Root crops 0.35 -0.48 -0.31 0.09 0.35 -0.38
Eucalyptus 0.32 -0.33 0.15 0.45 -0.21 0.04
Fallow land 0.17 -0.13 0.12 -0.82 -0.01 0.19
Grazing land 0.21 -0.54 -0.01 0.09 -0.42 0.26
Vegetables -0.30 -0.20 0.34 -0.19 0.53 -0.06
Total area (hectares) -0.13 0.55 0.53 0.10 0.10 -0.06
Animal types
Local cattle 0.82 0.15 -0.02 -0.10 -0.09 -0.07
Equines 0.90 0.18 0.01 -0.12 -0.09 -0.07
Sheep and goat 0.71 0.05 -0.06 -0.03 0.01 -0.12
Improved cattle 0.26 0.13 -0.33 0.27 0.53 0.07
Total livestock unit (TLU) 0.67 0.47 0.23 0.01 0.05 -0.11
Initial eigenvalues
Total 3.16 1.86 1.38 1.12 1.08 1.02
% of variance 22.60 13.26 9.87 7.97 7.70 7.31
Cumulative (%) 22.60 35.87 45.74 53.71 61.41 68.71

Third, we developed distinct agronomic strategies using principal component factor

analysis (PCA) as outlined by Liyama et al. (2007). In this study, agronomic strategies are
defined as combinations of different land use portfolios3 pursued by farmers. They do not
represent activities at individual plot but are pooled from 179 farmers managing a total of
817 plots. Ratio of the area of each of the land use types in total land area and ratio
of TLU4 of each animal in total TLU was used for the factor analysis. We derived a new set
of variables/factor scores to represent dominant agronomic strategies from the original land
use portfolios using PCA. PCA is an appropriate multivariate tool when there is diversity
and high correlation among variables; it provides factor scores that can be used as inputs
for further statistical analysis and gives distinct components that are uncorrelated with each
other but linear combinations of the original variables (Johnson and Wichern 2002). The
analysis gave factor score values (using a regression method) for each of the 179 house-
holds based on the degree of involvement to the different land use portfolios. We identified

3
Cereals (‘tef’, maize, sorghum, barley, wheat); vegetables (tomato, onion, cabbage); root crops (potato,
sweet potato); legumes (faba bean, field pea, chick pea, lentil, grass pea); perennials (eucalyptus); oil crops
(linseed, Niger seed); fallow land; grazing land while animal types include: local cattle: (ox, bull, heifer,
cow, calf); equines (donkey, horse, mule); sheep and goats; improved cattle.
4
TLU is tropical livestock unit calculated as follows: An ox is equivalent to 1.1TLU, bull 1.1TLU, cow
0.8TLU, horse 0.8TLU, mule 0.8TLU, heifer, 0.5TLU, donkey 0.36TLU, calf 0.2TLU, sheep 0.09TLU and
goat 0.09 TLU (Sharp 2003).

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554 A. M. Oumer, A. de Neergaard

six distinct agronomic strategies (Table 3). The cutoff for retaining factors was eigenvalues
[1 because the components are extracted from a correlation matrix (Johnson and Wichern
2002). The six principal component factors collectively explained 69% of the sample
variance (the original land use portfolios). Each agronomic strategy is named based on the
estimated factor loadings or principal component factors (PCs) and triangulated with prior
qualitative interview data. The cutoff for interpretation of each component/strategy was
factor weights over 0.20 in absolute values or less when necessary. Each strategy is briefly
described below:

2.3.1 Principal component factor 1 (PC1): Root crop-local livestock-eucalyptus

This component accounts for 22.6% of the total variance for the original variables.
Households with a higher score for this component are more likely specialized in an
intensive form of farming by integrating root crops (0.35 mainly potato) with local live-
stock (0.82 local cattle, 0.90 equines, and 0.71 sheep and goats). They are also expanding
to eucalyptus plantation (0.32) and improved cattle (0.26). This agronomic strategy tends
to be more ‘market oriented’ by integrating potatoes with livestock and eucalyptus tree
plantation.

2.3.2 Principal component factor 2 (PC2): Cereal-local livestock

The weight of cereals was very distinct in this path (0.73) and with significant total land
access. Farmer who have high score for this path may engage in extensive farming with
large land (0.55) and with less possibility of root crops (-0.48) but moderately associated
with livestock holding (0.47). This strategy may not have enough grazing land to further
keep more cattle (-0.54) compared to PC1. This strategy tends to be more oriented to
subsistence farming and retain as much feed from crop residues for their local cattle to
substantiate wild grazing. The component accounts for 13.26% of the total variance for the
original variables.

2.3.3 Principal component factor 3 (PC3): Legumes–vegetables

Ratio of leguminous crops was distinctly positive (0.71) followed by vegetables (0.34) but
was negatively associated with livestock holding, root crops, cereals, and grazing land.
Farmers who have high score values with this path integrate leguminous crops with
vegetables and some eucalyptus. This strategy tends to be market oriented by growing
legumes and vegetables. The component accounts for 9.87% of the variance for the ori-
ginal variables.

2.3.4 Principal component factor 4 (PC4): Eucalyptus-improved cattle

The ratio of eucalyptus was highly positive (0.45) followed by improved cattle (0.27),
legumes, and oil crops (0.21) but negatively associated with fallow land (-0.82), vege-
tables and all the local livestock. Farmers with high score values for this group may
integrate trees with improved livestock in a zero grazing system but have less opportunity
to keep local livestock as there is not enough grazing land. This strategy tends to be more
oriented in selling of eucalyptus tree than farming annual crops. The component accounts
for 9.97% of the total variance for the original variables.

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Understanding livelihood strategy-poverty links 555

2.3.5 Principal component factor 5 (PC5): Vegetables-improved cattle-root crop

Ratio of vegetables and improved cattle was important in this path (0.53) and was followed
by root crop (0.35) and oil crops (0.24). The path has negative ratios for cereals (-0.27)
and grazing land (-0.42). Farmers who have high score values for this component may
integrate vegetables with improved cattle but less exposure to cereals and less chance of
keeping traditional animals. This strategy tends to be market oriented by integrating
vegetable production with relatively more improved cattle in a zero grazing system. The
component accounts for 7.70% of the total variance for the original variables.

2.3.6 Principal component factor 6 (PC6): Oil crops grazing land

Ratios of oil crops were highly positive (0.81) followed by grazing lands (0.26) and fallow
land (0.19) but was negative to livestock holdings and the rest of the major land uses. Oil
crops are low-input crops often planted at the end of cropping season when all the options to
plant higher value crops are over due to farm and asset-related constraints. Farmers who have
higher score for this path may leave their land even not cultivated resulting in ‘unintended
fallow and grazing land’. This strategy can be characterized as the highest level of subsis-
tence orientation or it can be characterized as a strategy even ‘farming is hardly possible’.
The component accounts for 7.31% of the variance for the original variables.

2.3.7 Comparing clusters or income quartiles

After cleaning the data for possible outliers and checking normality, we ran the general linear
model (GLM) multivariate procedures to compare mean values across the clusters or income
quartiles. The results contain F-test results showing if the means compared are statistically
significantly different across the clusters and Duncan’s multiple range test results to show if
the means are significantly different between subsets of the clusters or income quartiles.

3 Results

3.1 Income quartiles in the study area

We found the majority of the farmers (nearly 46%) in the lowest income quartile while few
farmers (nearly 4%) were found in the highest income quartile (Table 4). The average
annual gross income of the sampled farmers was ETB 6,581 or U.S. $598. Crop income
and off-farm income were steadily increasing across the income quartiles. Crop was the
major income source among the income cluster groups while off-farm income contributes
28% to total annual gross income.

3.2 Major characteristics of income quartile groups

Household characteristics like sex, age, and education level of the household head were
important factors for income inequality (Table 4). The top income quartile is characterized
by young educated households. Those in the lowest income quartile are relatively far from
the nearest market. Farmers in the upper income quartiles had more exposure to groups in
research and NGOs compared to the bottom quartiles. This group also had more land and
livestock access which are key assets in rural areas. Key assets differentiate the income
quartiles in which the poor are deprived of major capital assets except the family labour

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556 A. M. Oumer, A. de Neergaard

Table 4 Major characteristics of income quartile groups in the study area (GLM results)
Major capital asset indicators Quartile I Quartile II Quartile III Quartile IV Sig.

No of households (%) 82 (46%) 64 (36%) 25 (14%) 8 (4%)

Human capital
Sex of the household head 0.71 0.89 0.80 1.00 0.023
(1 = male, 0 = female)
Age of household head (years) 49 46 46 34 0.077
Educational level of household head (years) 3.07 4.00 5.04 7.00 0.008
Family labour of the household (AE) 4.60 4.75 5.13 4.35 0.648
Physical capital
Distance from nearby market 55 41 48 49 0.002
(minutes of walking)
Social/institutional capital
No. of years in research groups 0.26 0.33 0.72 1.75 0.030
No. of years in NGO activities 0.16 0.60 0.96 0.75 0.022
Financial capital
Regular off-farm income access 0.23 0.52 0.56 0.75 0.000
(1 = yes, 0 = no)
Casual off-farm work access 0.21 0.17 0.32 0.13 0.452
(1 = yes, 0 = no)
Remittance income access 0.02 0.11 0.08 0.13 0.188
(1 = yes,0 = no)
Access to credit (1 = yes, 0 = no) 0.65 0.64 0.84 0.88 0.171
Total livestock unit (TLU) 3.18 3.55 4.50 5.68 0.035
Natural capital
Ecology of the area 0.72 0.71 0.40 0.50 0.013
(1 = midlands, 0 = highlands)
Total land access (hectares) 1.64 2.03 2.29 3.63 0.000
Percent of plots with improved seed 0.31 0.62 0.91 1.58 0.000
Mean annual gross income (ETB/year)
Agricultural crop income 952 3,113 10,693 26,249 0.000
Livestock income 315 963 286 1,224 0.000
Off-farm income 483 2,566 2,988 8,103 0.000
Total gross income 1,774 6,663 13,971 35,576 0.000

(AE5). Our key informants indicated farmers in the lowest income quartile as ‘‘those who
do not pay credits’’ due to their lack of key assets (e.g. land, livestock) which complicates
their access to microfinance institutions and collaterals for borrowing money from local
institutions. The upper income quartiles tend to engage more in regular off-farm work like
grain trading, fattening, and livestock trading while casual off-farm work was a key feature
of the bottom income quartiles. Farmers in top income quartile are also found in the
highlands of ‘Jeldu’ district especially in villages that got substantially more institutional
support than the midlands of ‘Guder’. Women-headed households are also positioned at the
lowest income quartile in many cases. The percentage of plots treated with improved seed

5
Adult equivalent (AE) is calculated as follows: A person over 15 is equivalent to 1AE, 0.65AE for over
5–14, and 0.24AE for under 4 (Liyama et al. 2008).

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Understanding livelihood strategy-poverty links 557

steadily increases from the lowest quartile (quartile I) to the highest quartile (quartile IV)
suggesting the lowest income quartile groups do not have the means to invest in agri-
cultural intensification.

3.3 Dominant agronomic strategies (PCs)-poverty links

We found farmers that pursue the root crop-dominated (PC1) agronomic strategy are on the
upper income quartiles, while the cereal-dominated (PC2) and the oil crop (PC6) agro-
nomic strategies are largely pursued by farmers in the two bottom income quartiles
(Table 5). PC2 and PC6 are trapped in a subsistence mode of agriculture, the main motive
of which is to produce for household consumption and thus do not significantly contribute
to income implying that such agronomic strategies hardly make a difference in poverty
alleviation. This is because they are limited by cash availability (see Sect. 2.3), a scenario
that closes options to move out of poverty. PC3 and PC4 are also adopted by the highest
income quartile (quartile IV), while PC5 is more for third income quartile group. Gener-
ally, smallholder farmers on the top quartile are less involved in the cereal-based agro-
nomic strategies, an indication to construct pathways out of poverty. Nearly 82% of the
sampled farmers in the study area belong to the two bottom quartiles (quartile I and II),
while about 18% are on the upper quartiles (quartile III and IV) that adapted a more
intensive and cash-generating agronomic path. The poor are limited by capital assets to
engage in profitable agronomic strategies like potato, vegetables, and legumes (see Sect.
3.2). In connection to this, one respondent farmer from Guder district said ‘‘…better
technologies are being used by better farmers…’’ indicating that better off farmers have
the access and the means to engage in high economic return agricultural activities.

3.4 Livelihood diversification-income-food security links

We compared the four livelihood diversification clusters with their food security and
income status using proxy indicators. The four clusters were significantly different with
respect to the selected indicators (Table 6). The casual off-farm-dominated livelihood
diversification strategy (cluster 2) was found to consume their harvest early and start to buy
extra food to sustain the family, while the cereal-dominated diversification strategy
(Cluster 1) could sustain their household for almost a year without buying extra food.
Cluster 2 also had the highest expense for purchasing extra food crops despite the low

Table 5 Links between agronomic strategies and income quartiles (GLM results)
Major agronomic strategies (PCs) Income quartile groups Sig.

Quartile I Quartile II Quartile III Quartile IV

PC1: root crops -0.22a -0.08a 0.53b 1.26c 0.000

a a a
PC2: cereals 0.12 0.03 -0.31 -0.49a 0.140
PC3: legume-vegetables -0.18a 0.13a 0.01a 0.78b 0.032
PC4: eucalyptus -0.02a -0.11a -0.02a 1.06b 0.019
PC5: vegetables -0.10a -0.05a 0.55b -0.23a 0.028
PC6: oil crops 0.04a 0.02a -0.15a -0.16a 0.826
Principal component factor scores of each of the 179 households were compared across the income quartiles.
Superscripts a, b, and c indicates subsets of quartiles which are statistically significantly different from other
subsets at 5%. A subset with superscript ‘a’ has the smallest value and the one with ‘c’ has the largest value

123
558 A. M. Oumer, A. de Neergaard

Table 6 Food security status of the livelihood diversification clusters (GLM results)
Major indicators Cluster 1 Cluster 2 Cluster 3 Cluster 4 Sig.

No. (%) of households 41 (23%) 26 (15%) 69 (38%) 43 (24%)

Produce consumed without buying extra food (months) 11.0c 7.0a 8.5ab 9.3b 0.000
a b b
Expense for buying extra food crop (ETB) 268 1,176 957 907b 0.003
Total consumption value (ETB) 6,294b 3,666a 4,629ab 7,988bc 0.000
Total gross income (ETB) 4,387a 4,435a 5,464a 12,473c 0.000

Superscripts a, b, and c indicates subsets of clusters which are statistically significantly different from other
subsets at 5%. A subset with superscript ‘a’ has the smallest value and the one with ‘c’ has the largest value

income they have. When we see the total gross income and consumption value,6 Cluster 4
had the highest value indicating that farmers are on a better situation compared to the other
groups. Qualitative interviews showed that the ‘better off’ farmers buy ‘‘better’’ food crops
such as ‘tef’ to meet their consumption unlike the poor who purchase the cheapest possible
grain in the market. Generally, Cluster 2 is food insecure while cluster 1 could be vul-
nerable in times of shocks or climate/weather variability compared to the clusters 3 and 4
that had more options to generate income and consumption demands.

3.5 Livelihood diversification and household expenditure priorities

We used household expenditure priorities to understand how the different livelihood

diversification strategies invest their household income (Fig. 3). Major expenses were food
and farm inputs for all cluster groups. The result showed that all clusters buy food crops
significantly except the cereal-dominated strategy (Cluster 1). The casual off-farm-dom-
inated livelihood strategy (Cluster 2) had highest priority of buying food while much less
for farm inputs, which means less productive in farming and land resource management.
On the other hand, the ‘better off’ farmers who pursue root crop-dominated strategy
(Cluster 4) significantly utilize land resource through potato intensification (e.g. by renting

Fig. 3 Mean of household

expenditure items across
dominant livelihood
diversification clusters (n = 179)

6
It was calculated by multiplying quantity of food reserved for consumption by the price given during the
survey.

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Understanding livelihood strategy-poverty links 559

Table 7 Linkages between agronomic strategies and villages of the study areas (GLM results)
Agronomic strategies (PCs) ‘Guder’ ‘Jeldu’ Sig.

‘Quilinto’ ‘Degafille’ ‘Tulidimtu’ ‘Chilanko’ ‘Alle’ ‘Fello’

PC1: root crops -0.55a -0.55a -0.25a 0.90b 0.57b 0.86b 0.000
bc bc c ab a
PC2: cereals 0.19 0.16 0.41 -0.27 -0.40 -0.44a 0.003
b b b ab ab
PC3: legume-vegetables 0.30 0.10 0.12 -0.16 -0.16 -0.58a 0.062
ab ab ab a b
PC4: eucalyptus 0.10 -0.16 0.00 -0.42 0.22 0.34b 0.124
b b b a ab
PC5: vegetables 0.40 -0.02 -0.06 -0.62 -0.10 0.37b 0.007
b bc ab c ab
PC6: oil crops 0.03 0.20 -0.14 0.57 -0.34 -0.39a 0.008
Principal component factor scores of each of the 179 households were compared across the six villages in
the two study locations. Superscripts a, b, and c indicates subsets of villages which are statistically sig-
nificantly different from other subsets at 5%. A subset with superscript ‘a’ has the smallest value and the one
with ‘c’ has the largest value

in more new land and buying farm inputs) compared to Cluster 2. They also tend to
improve their household equipments, save more money, and buy food grain to supplement
their consumption demands. Our qualitative interviews also showed that young farmers on
the highest income quartile and/or Cluster 4 largely invest on land/farm-related inputs
including leasing in new land compared to other livelihood priorities. In relation to this, a
young key informant farmer said ‘‘our life is from land to land’’ to show that investing on
farm inputs has a substantial share of household expenditure. The higher expense for farm
inputs by Cluster 1 is associated with policy of the Ethiopian government in subsidizing
agricultural inputs for main season crops than crops grown by irrigation or during the short
rainy season.

3.6 Village profile of the dominant farming strategies

By comparing mean factor score values (PCs) across the six villages, we found that
villages far from town (market or ministry office) tend to engage in cereal-dominated/
subsistence mode of agronomic strategy (Table 7). PC1 was a characteristics feature of
‘Jeldu’ district and its villages. ‘Chilanko’ village had higher involvement in PC6. PC2 was
a feature of ‘Tulidimtu’ village which is in ‘Guder’ district –relatively far from the town
compared to the other villages studied. Farmers in ‘Quilinto’ village were involved in PC2,
PC3, and PC5 –relatively more diverse agronomic strategies. ‘Chilanko’ and ‘Tulidimtu’
were more engaged in cereal production (PC2) compared to the other villages. These
villages were the furthest from town/market in both study locations (see Sect. 2.1).

4 Discussion

4.1 Poverty and resource use strategies

We found that farmers in the highest income quartile (Cluster 4 or PC1) use their land
resource intensively through potato production which needs more inputs and management.
On the other hand, farmers in the lowest income quartiles that tend to depend on casual off-
farm work had more food security concern than investing on farm inputs. The result is
consistent with studies that showed strong linkages between poverty and resource use flows

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560 A. M. Oumer, A. de Neergaard

(e.g. Cramb et al. 2004; Tittonell et al. 2005; Tizale 2007; Ncube et al. 2009; Tittonell et al.
2010). The rich often tend to intensify more by buying more fertilizer and manure
application (Tittonell et al. 2005; Nucube et al. 2009). A study from central Vietnam
showed that average and better off farmers not only generated more income but also
applied more manure and fertilizer to their crops compared to the poor farmers (Cramb
et al. 2004). The poor were less likely to engage in soil conservation activities in central
highlands of Ethiopia (Tizale 2007) but engage in off-farm work as they have more food
security concern than resource management (Wagayehu and Drake 2003; Morera and
Gladwin 2006).

4.2 Links between assets, livelihoods, poverty, and resource management

We found that diversifying livelihood activities (e.g. Cluster 4/PC1; Cluster 3/PC5) tend to
have positive outcomes in terms of household income as well as land resource manage-
ment. Diversification of portfolio of livelihood activities has been pointed out as a more
realistic approach for poverty reduction (Ellis 2000; Freeman et al. 2004; Liping et al.
2008). Based on a World Bank (2008) recommendation, these groups are likely to benefit
from the promotion of agriculture as engine of rural development. Households that pursue
diverse income portfolios including off-farm income are likely to take up new farming
technologies and engage in resource conservation practices (Liyama et al. 2008).
In our study context, off-farm activities are less developed and contribute about 28% of
the total income. Our qualitative interviews showed that farmers who had access to proven
technologies like potato seed production tend to diversify into more regular off-farm
activities like grain trading, fattening, and small kiosk business. On the other hand, farmers
who were in less diversified agronomic strategies (i.e. PC2 and PC6) engaged in casual off-
farm activities as a means of survival to meet their food demands and household income.
This is because the poor are deprived of major capital assets except the family labour that
may limit resource use and management. Such discrepancy of asset endowments in rural
heterogeneous households have been widely demonstrated by other researchers in devel-
oping countries (Ellis and Mdoe 2003; Freeman et al. 2004; Ellis and Freeman 2004;
Cramb et al. 2004; Okello et al. 2009).

4.3 Livelihood diversification strategy-poverty links

We found that the upper income quartiles often get better access to assets/institutional
support that enable them to engage in better livelihood activities. For example, Holetta
Research Center provides improved seed and training (e.g. potato, vegetables, and
legumes) and conducts on-farm demonstration trials in collaboration with regional research
partners, local NGOs establish grain banks, district agriculture office provides extension
services as well as input and output marketing often geared to ‘better off’ farmers than the
poor. The root crop-dominated livelihood diversification strategy (cluster 4) had the
highest annual gross income, while the cereal-dominated livelihood diversification strategy
(cluster 1) had the least income. The result is consistent with the notion that there are
mobility barriers or entry constraints toward high return activities including intensified
farming as well as profitable off-farm activities for the poor households (e.g. Abdulai and
CroleRees 2001; Freeman et al. 2004; Babulo et al. 2008; Van den Berg 2010). Our study
showed that farmers in the bottom income quartiles engage in casual off-farm activities
such as daily labour, petty trade, brokering, selling grass, and selling fuel wood including
animal dung. Similar results were reported in Kenya where the poor depend mostly on

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Understanding livelihood strategy-poverty links 561

risky and less rewarding employments (such as charcoal making and fire wood selling)
while the better off diversified into higher return off-farm activities such as salaried
employment (Ellis and Freeman 2004; Freeman et al. 2004; Liyama et al. 2008). Lack of
skills, knowledge, and financial capital are key barriers for the poor to engage in high
economic return activities (Poole et al. 2007; Babulo et al. 2008; Liyama et al. 2008). The
finding was consistent with studies conducted in Kenya that showed the lowest third
income groups were short of key assets except for their family working labour (Freeman
et al. 2004; Ellis and Freeman 2004). Our study also revealed skewed access to research
support across the income quartiles in which the upper quartiles had a long history of
participation in farmer research groups. This is an unfortunate and unintended result of
outreach programmes and researchers tend to focus on the resource-endowed farmers to
ensure maximum impact and success of their program and substantial buy-in from the
target farmers. Such lack of assets pushes the vulnerable livelihoods to choose defensive
strategies for survival further decreasing welfare status (van den Berg 2010). Similar result
reported in Vietnam showed that more institutional arrangement for livestock access was
more utilized by the average and better off farmers (Cramb et al. 2004).
We found that poor farmers engaged more in cereal-dominated farming as well as
casual off-farm activities which are the least diversified agronomic strategies (PC2 and
PC6). Moreover, the poor hire out labour to the better off farmers that engaged in intensive
potato and vegetable production by the minimum wage possible, taking away the family
labour of the poor that could be used for investing on own land resource. According to
Babulo et al. (2008), even rural–urban migration is a less favored strategy to get out of
poverty in northern Ethiopia due to the imperfect rural labour market. They further noted
that forest-related activities will continue to be a more dependable livelihood strategy for
the poor as family size increases. A study conducted in Nepal showed that agricultural
production alone is not a viable livelihood option (Bhandari and Grant 2007). Their study
showed that households growing crops and highly dependent on off-farm income had more
livelihood security than those highly dependent on agricultural production and forest
products.
We found that nearly 46% of the sampled farmers in this study at the lowest income
quartile were engaged in cereal or casual off-farm-dominated livelihood strategies. Similar
results have been reported in northern Ethiopia where the majority of farmers were sub-
sistence level and the traditional cereal livelihood strategy was unable to satisfy their cash
and consumption demands (Babulo et al. 2008). They argued that in northern Ethiopia, in
the long run, the cereal-dominated livelihood strategy has limited chance for poverty
reduction. They identified the need to transform to a more diversified cash income-based
strategies such as off-farm activities, honey production, poultry, and horticulture. Their
notion best describes our case study area, i.e. ‘Jeldu’ highlands where the root crop-
dominated agronomic strategy (PC1) was cereal (barley–wheat)-based farming system
until Holetta Agricultural Research Center (HARC) introduced improved potato technol-
ogies in collaboration with CIP (International Potato Centre) and other regional institu-
tions. Smallholder farmers have improved their income as well as food security following
such interventions. Our study also revealed the relationship between villages where
farmers residing and their agronomic strategies (PCs) that indirectly indicate their asset
endowment and poverty level. The result is consistent with a study that showed poverty at
district level in Kenya influenced by distance to major town, road density, access to
education, soil fertility, and agricultural potential (Kristjanson et al. 2005). It has also been
pointed out education and locations are at least as important as land ownership to improve
household welfare status in rural areas (van den Berg 2010). Our data also show that access

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562 A. M. Oumer, A. de Neergaard

to infrastructure is closely connected to household income and level of agricultural

diversification. This clearly demonstrates the importance of developing market infra-
structures in transforming subsistence farming to commercialized agriculture.

5 Conclusion

Our study showed that majority of households found in the bottom income quartiles that
pursue least diversified/losing livelihood strategies, and this is mainly attributed to lack of
key capital asset endowments except for family labour. Contrarily, farmers in the highest
income quartile get better access to assets and institutional support that enable them to
engage in a better livelihood activities and resource management. We found that villages
far from town, market, and ministry office tend to engage in cereal-dominated/subsistence
mode of agronomic strategy implying the role of institutional and market access in shaping
livelihood strategy-poverty links. Development policies aimed at improving assets for the
poor households may direct them to high return agricultural activity (e.g. potatoes or onion
seed production). This in turn may create more cash options to engage in high return/
winning livelihood strategy (e.g. moving them from casual to regular/business types of off-
farm activities and/or from subsistence to market-oriented/intensified agronomic
strategies).
In light of our findings, we recommend the following specific interventions for each
typology. For example, (a) for Cluster 4/PC1/Quartile IV (root crop-livestock dominated),
it may be feasible to develop agribusiness by improving output marketing of value added
potato & livestock products and also promoting regular off-farm activities such as grain
trading, hotels, animal fattening, and small machineries (e.g. motorized grain mills), (b) for
Cluster 3/PC3&PC5/Quartile III (vegetables-legumes-improved cattle-regular off-farm
dominated), support to develop improved agricultural production through improved
technologies (e.g. improved agronomic practices, irrigation and varieties), then facilitate
market access, i.e. input and output marketing by targeting the potential commodities such
as vegetables, legumes, and improved cattle), and concurrently promote regular off-farm
activities such as salaried employment, livestock trading, and fattening to use advantage of
the district’s (i.e. Guder) proximity to major towns, (c) for Cluster 2/PC6/Quartile I/II
(casual off-farm work dominated), support through social promotion and/or development
intervention such as financial credits and loans which could help farmers to begin farming,
organize farmers for a better collective action to create starting capital to enter to the high
economic return activities, and improve the local labour market information/wage rates, (d)
for Cluster 1/PC2/Quartile I/II (cereals dominated), support to develop market-oriented
enterprises/crops through external support by surrounding institutions (e.g. trainings/
awareness to improve human capital asset of the farmers) and in some cases financial
transfers/loans to create a broader asset base to break entry barriers toward profitable
farming/livelihood activities may be sought to achieve positive livelihood outcomes.
In this study, we combined different typologies together and also triangulated our
quantitative analysis with qualitative interviews to better capture household heterogeneities
in rural areas. While we recognize the limitations of cross-sectional household surveys,
these combined methods and approaches would offer a better understanding on livelihood
strategy-poverty links than when using either of the different methods separately. This
should contribute to support development policy tools aimed at targeted interventions
recognizing household heterogeneities in rural areas.

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Understanding livelihood strategy-poverty links 563

Acknowledgments We are grateful to the Danish Government and the Danish International Development
Assistance (DANIDA) for their financial support. We would like to thank Dr. Chilot Yirga Tizale for his
valuable comments during the field work and Dr. Carsten Nico Hjortsø for his critical comments on earlier
draft of this manuscript. We also would like to acknowledge all individuals who assisted us during data
collection and the cooperation of community in the study areas during the survey.

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