Abstract
In Ethiopia, agriculture is the principal source of food and livelihood for many rural households, making it a central component of programs that seek to reduce poverty and achieve food security. Since the sector is faced with many challenges, rural households are compelled to develop strategies through diversification to cope with the increasing vulnerability associated with agricultural production. As a result, the purpose of this research is to assess the impact of livelihood diversification on household poverty in the Jimma zone of Ethiopia's Oromia regional state. A multistage sampling procedure was employed to select 385 sample household heads. The study utilized data obtained from a cross-sectional survey using an interview schedule, focus group discussion, key informant interview, and personal observations. Both descriptive and econometric data analysis techniques were applied. The result of the FGT poverty measure revealed that the incidence of poverty among rural households was 37.14%, implying that 62.86% were non-poor. The descriptive statistics revealed that age of household, dependency ratio, year of schooling, sex of household, livestock ownership, landholding, non-farm income, market distance, and extension contact were found to have a significant influence on the poverty status of a household at different probability levels. Based on the cost of basic needs approach, it was applied to measure poverty status. The results of the logit model indicate that family size, landholding, livestock ownership, year of schooling, access to credit services, and off-farm income of the households were found to have significantly determined livelihood diversification. Moreover, the results of the propensity score matching indicate that household participation in livelihood diversification has a positive and significant impact on household poverty. Accordingly, households with diversified livelihoods were found to be 9% better off than those that were not diversified in terms of poverty. Policies aimed at increasing the income generation ability of the household should be strongly considered. Therefore, to ensure the capacity of rural households to practice farming along with a wide range of income-generating activities to improve the well-being of the rural poor and have a significant impact on poverty reduction, participating in livelihood diversification should be given emphasis in development planning.