Examining the impacts of converting commercial Eucalyptus woodlots into cropland on rural households’ income and income diversification in Northwestern Ethiopia

Farmers in the Northwestern highlands of Ethiopia have begun converting commercial Eucalyptus woodlots into cropland. However, the impact of this transition on rural households' income and income diversification remains unclear. To fill this gap, this study investigates the impacts of this shift on farmers' income and income diversification level with the endogenous switching regression model and Simpson’s diversification index (SDI) approach, respectively. Through the application of household interviews (n=362), key informant interviews (n=36), and focus group discussions (n=7), data were collected. A multistage sampling method was employed to select households, while snowball and purposive sampling techniques were used for FGDs and KIIs. Endogenous switching regression analysis shows that shifting woodlots into cropland has a significant income difference between woodlot converters, who earn an average annual income of $4,313.45, compared to $2,564.42 for non-converters. The income gap ($1,744.98) is significant at a t-value of 10.6. Simpson’s Index of Diversity (SID) also reveals that converters exhibit higher income diversification (SID = 0.7611) compared to non-converters (SID = 0.6602), reflecting a strategic shift toward a multi-sectoral livelihood portfolio. Converters' income increased significantly, influenced by several factors, including gender (p = 0.049), landholding size (p = 0.000), total livestock units (p = 0.001), negative perception of Eucalyptus commercialization (p = 0.001), market access (p = 0.019), comparative benefits of crop farming (p = 0.006), and cropland size (p = 0.017). Although this conversion has positive benefits for increasing income and serves as a diversified livelihood strategy, it also presents ecological trade-offs. Findings emphasize the need for context-specific strategies and provide a framework for sustainable land use conversion in Ethiopia. Further research should focus on interdisciplinary research to assess sustainability, explore alternative land-use models, and examine market dynamics and policy incentives.