Income diversification strategy of poor urban households in the informal sector: The case of major urban centers of Ethiopia.

This study is motivated by the existence of likited empirical evidence pertaining to income diversification strategy fo urban households in Ethiopia.The specifiec objectives of the study are to characterize labor income diversification strategy of poor urban households in Ethiopia as well as to identify and explain the major determinants of the same. A longitudinal survey data collected by the department of Economics of Addis Ababa University in collaboration with Economics Department of Gothenburg University from 1997 to 2004 was used for study.A conceptual model of moonlighting in a household context was adopted. Various descriptive statistical tools such as frequency distribution were employed. Moreover, a conditional fixed effects poisson regression model was estimated.Smaller proportion of sample households were found to be dependent on multiple labour income sources compared to some other African urban areas.However, a trend of increased reliance on the same over time was also observed.In general,exposure to an external income shock was not found to have the expected positive and statistically significant effect upon income diversification. However, presence of non labour income source was found to have significant and negative effect up on income diversificationefforts as expected.These indicate that income diversification was not an important household strategy for the sample of poor urban households considered in the study.On the other hand, access to credit especially in the capital city was found to be associated iwth income diversification than with expansion of existing income sources.The study has such policy implications that the practitioners of the informal sector into with most poor urban households diversify their income source for distress and poverty reasons need to be supported.This could be though improveing their access to credit, technology,training and marketing in order to strengthen their productive capacity to create jobs and generate income.Moreovr, provision of some sort of business resk mitigation scheme for poor urban households of especially the capital city need to be envisaged through facilitating formation of joint ventures or cooperatives.