Climate change, land use shifts, and rural economies in Ethiopia

Farm households in developing countries are highly vulnerable to extreme weather shocks, which substantially influence land use and investment decisions. In alignment with UN Sustainable Development Goal 13 (Climate Action), this study examines the impact of climate-induced drought on cropland allocation and rural livelihoods in Ethiopia. Using satellite-derived Enhanced Vegetation Index (EVI) anomalies as an objective proxy for drought, the analysis reveals that households in drought-affected areas cultivate smaller plots and experience significant declines in agricultural productivity. Heterogeneity analysis indicates that drought effects vary markedly across landholding quintiles, with the lowest quintile bearing the most severe losses. Concurrently, drought induces a labor reallocation toward non-agricultural activities, resulting in increased off-farm income that partially mitigates adverse impacts. These findings underscore the critical need for investments in income diversification and productivity-enhancing interventions to strengthen rural resilience. Key policy measures include promoting diversified income sources, supporting off-farm enterprises, implementing weather-indexed insurance, and strengthening early warning systems. Achieving these goals necessitates coordinated collaboration among local communities, policymakers, and development partners to advance climate adaptation and sustain rural livelihoods.