Statistical Investigation of Determining Factors of Rural Households’ Income: Evidence from South Eastern Ethiopia

Abstract

This study pinpointed determining factors of rural households’ income with reference to Sinana district, South Eastern Ethiopia using Micro econometric analysis. To conduct this investigation, household level data is gathered from 267 randomly selected rural household heads from four kebeles of the district. Descriptive statistics and econometric model were used for the analysis of primary data. The result of descriptive statistics showed that 71.5% of the sampled household heads were involved in farming occupation category whereas the rest 12% and 16.5% were involved in government job and trading occupation categories, respectively. The result confirmed that farming occupation category is the prominent source of income for the rural households in the study district. The result of classical linear regression depicted that age of household head, land holding size, annual expenditure and total livestock holding were significant determining factors of annual total income. Square root transformation was made on annual income to decrease the variance and the result further revealed that square root of annual total income increases with the increase in land holding size, annual expenditure and total livestock holding whereas decreases with the increase in age of household head. In order to accelerate the diversification of the annual income of rural communities, those significant variables could get special focus by policy makers and development agents.