DETERMINANTS OF INCOME DIVERSIFICATION OF URBAN HOUSEHOLDS; IN CASE OF WOREDA 07 OF GULELE SUBCITY IN ADDIS ABABA.

Abstract

This study investigates the determinants of income diversification among urban households in Woreda 07 of Gulele Subcity, Addis Ababa, addressing a critical gap in understanding how households cope with economic uncertainties in rapidly urbanizing contexts. The research aims to identify the factors influencing income diversification strategies and the extent to which various demographic, economic, and social variables affect these strategies. Data was collected from a sample of 99 households using a structured questionnaire, which facilitated the gathering of both qualitative and quantitative information. The methodology included face-to-face interviews and key informant discussions, providing a comprehensive understanding of household characteristics, income sources, and factors influencing diversification. The analysis employed descriptive statistics and Tobit regression models to ascertain the relationships between various determinants and income diversification outcomes. The findings reveal that Total Livestock Owned , Education Level , Land Size and Source of Income significantly influence households’ capacity to diversify their income streams. Specifically, higher education levels correlate with increased income diversification, while larger landholdings enable households to engage in a broader range of economic activities. In contrast, the total number of livestock owned negatively impacts diversification efforts, as households may rely heavily on livestock for their livelihoods, thereby limiting their engagement in alternative incomegenerating activities. Based on these results, the study recommends enhancing educational programs focused on financial literacy and entrepreneurship, promoting saving habits through community initiatives, facilitating access to microloans and financial advisory services, and developing supportive policies that mitigate risks associated with economic fluctuations. By implementing these recommendations, urban households can improve their resilience against economic shocks and enhance their overall livelihood security through diversified income opportunities