Abstract
In Ethiopia, rural households are under risk in the sustainability of sources of income and forced to involve in diversified livelihoods because of the uncertain nature of the agricultural sector. Therefore, the aim of the study is to measure the livelihood diversification strategies and its impacts on rural households' welfare. The study used cross-sectional data, which is quantitative and qualitative in nature. Through the multistage sampling technique, the study selected 398 samples from the south Gondar zone. The data was analyzed through descriptive statistics, and Tobit and multiple linear regression models. The descriptive statistics analysis showed that income from crop and livestock productions are the most important contributors (97.74%) to livelihood diversification in the study area. The Simpsons Index of Diversity is (0.4) showing that there is a lower livelihood diversification in the study area. The Tobit model regression results showed that education, family size, irrigation, soil conservation, extension service, livestock, and infrastructure facility affect the intensity of livelihood diversification. Furthermore, the multiple regression result revealed that livelihood diversification has a positive impact on the welfare of rural households. The study concludes that to improve the livelihood and welfare of rural households, diversified livelihood strategies should be enhanced by facilitating farm activities through access to inputs, irrigation schemes, and infrastructure and off-farm activities. This article applied the Simpsons Index of Diversity (SID) to estimate the intensity of income diversification.• The method helps to measure the amount of diversified income and its effect on the welfare of rural dwellers. • The study helps to identify the common livelihood strategies and their relevance to improving rural living style.