1 From rural to urban, but not through migration: Household livelihood responses to urbanization in Northern Ethiopia Tsega G. Mezgebo 1 and Catherine Porter 2 Abstract: Developing countries are urbanizing rapidly, and this process places high demands on nearby agricultural land as the urban area expands. In Ethiopia, the incorporation of rural villages in peri-urban areas takes place through land expropriation and legislation. We provide empirical evidence on affected households’ adaptation of income diversification strategies, in Tigray, Northern Ethiopia through survey data collected for this purpose with households on either side of the adjusted administrative boundary. The survey took place two years post-expropriation, where local governments compensated farmers for lost land with quite substantial amounts of cash relative to annual farm earnings. Our multinomial logit results show that urban-reclassified households show continued high reliance on agricultural income, despite their limited access to farmland post- expropriation. Combining farming with skilled nonfarm employment is the dominant strategy for better-off households under both rural and urban administrations. Surprisingly, the poor under urban administration participate less in nonfarm employment compared with households still classified as rural, and are more likely to be dependent on transfer income. Previous experience in the nonfarm sector, rather than the amount of compensation, drives participation in skilled nonfarm employment. This has important implications for urban policymakers implementing expropriation, where the implicit assumption is that the cash injection will stimulate entry into skilled employment or business startups and smooth the transition into urban livelihoods. Keywords: income diversification, non-farm employment, peri-urban, urbanization, Africa, Ethiopia 1 Department of Natural Resource Economics and Management, Mekelle University. Email: tsegagi@gmail.com 2 Department of Accountancy, Finance and Economics, Heriot-Watt University. Email: catherine.porter@hw.ac.uk. Author contributions: Mezgebo designed and conducted the survey, both authors contributed to analysis and writing of the paper. Both authors have approved the final article. Many thanks to Dr Tassew Woldehanna, Dr Mary O’Shaughnessy and participants at EDRI seminar May 2015.