Livelihood strategies and the role of forest income in participatory-managed forests of Dodola area in the bale highlands, southern Ethiopia Yemiru Tesfaye a, ⁎, Anders Roos a , Bruce M. Campbell b , Folke Bohlin a a Department of Forest Products, Swedish University of Agricultural Sciences, P.O. Box 7008, SE-750-07, Vallvägen 9A, Uppsala, Sweden b CCAFS Secretariat, Faculty of Life Sciences (LIFE), University of Copenhagen, Bülowsvej 17, DK-1870, Frederiksberg C, Denmark abstract article info Article history: Received 9 September 2009 Received in revised form 4 August 2010 Accepted 21 January 2011 Available online 2 April 2011 Keywords: Income diversification Forest user groups Livelihood diversity Rural livelihoods Co-management To describe livelihood strategies in the context of a participatory forest management arrangement in the Bale highlands of southern Ethiopia, data were collected using four quarterly household income surveys and a focus group discussion. A principal component analysis followed by cluster analysis was used to establish typologies of households based on livelihood strategies. The result distinguishes five livelihood strategies with different outcomes and levels of livelihood diversification. Both the poorest and the better-off households pursue diversified strategies. However, in terms of income level and food security, business-based and crop- based strategies have better outcomes. Forest income is an important source of cash income and particularly for low income groups it provides opportunity to diversify their livelihoods. Household characteristics such as age of household head and possession of cropland together with geographical factors like altitude and distance from market were found to be the most important determinants of livelihood strategy choices. Implications of the results for policy and poverty alleviation are discussed. © 2011 Elsevier B.V. All rights reserved. 1. Introduction Rural households in sub-Saharan Africa are commonly involved in diverse livelihood activities to generate income and to meet their livelihood objectives (Barrett et al., 2001; Ellis, 2000a). Livelihood diversification is defined by Ellis (2000b) as the process by which rural households construct an increasingly diverse portfolio of activities in order to survive and improve their standard of living. Households diversify their activities out of various motives including risk reduction, reaction to crisis, in response to diminishing factor returns, to realise strategic complementarities between activities or to exploit the comparative advantages of technologies, skills or endow- ments (Barrett et al., 2001). Ellis (2000b) distinguishes voluntary motives for adoption of diverse livelihoods in response to seasonality, labour market opportunities, risk management strategies, credit substitution, and towards asset accumulation; and involuntary motives in the form of coping strategies. Traditional extension and development projects are often based on aggregates of populations and assumptions about their conditions, concerns and strategies that can result in unintended problems and misuse of resources (Conway et al., 2002). Policies aimed at rural productivity or poverty reduction must recognise the diversity of income portfolios at household levels (Ellis, 2000a,b; Bryceson, 1996). Particularly, sectoral policies must take in to account the widely differing impacts of various income sources on income inequality (Ellis, 2000a,b; Reardon et al., 2000).The structural relationships linking households to resource use entail going beneath aggregated income values and examining differentiations by unravelling the relationship between key socioeconomic factors and environmental resource use (Cavendish, 2000). Several empirical studies have described rural livelihoods and diversification behaviour focusing on different issues including: i) describing livelihood assets, constraints, associated strategies and livelihood outcomes (Abdulai and CroleRees, 2001; Campbell et al., 2002; Demissie and Workneh, 2004; Iiyama et al., 2008; Jansen et al., 2006a; Tefera et al., 2004; Woldenhanna and Oskam, 2001), ii) identifying determinants of household's behaviour in conservation practises (Iiyama et al., 2008; Jansen et al., 2006b), and iii) evaluating household adaptive capacity and food security (Block and Webb, 2001; Bogale, 2007). In general, identifying and explaining the determinants of households' diversification behaviour and livelihood strategies in different contexts has been a central focus. Taking rural households in Ethiopia and Tanzania, Dercon and Krishnan (1996) stressed the importance of skill, labour resources and asset constraints to the diversification behaviour of households. Tefera et al. (2004) have shown in the Hararghe highlands of Ethiopia that diversification is a survival strategy for the poorer groups whereas asset accumulation is the main motive for the better-off households. Poorer households are often excluded from more profitable activities due to lack of start-up capital and human capital such as labour and skill to enter into more remunerative activities (ibid). A similar pattern is also indicated by Dercon and Krishnan Forest Policy and Economics 13 (2011) 258–265 ⁎ Corresponding author. Tel.: +46 18 761299; fax: +46 18 67 34 90/67 34 89. E-mail address: yemiru.tesfaye@sprod.slu.se (Y. Tesfaye). 1389-9341/$ – see front matter © 2011 Elsevier B.V. All rights reserved. doi:10.1016/j.forpol.2011.01.002 Contents lists available at ScienceDirect Forest Policy and Economics journal homepage: www.elsevier.com/locate/forpol