Spatial Spillover Effects of Urbanization, Economic Growth, and Climate Variability on Agroforestry in Ethiopia

ABSTRACT Rapid urbanization and economic growth in Ethiopia are transforming rural landscapes and driving an increased demand for wood resources. In response, smallholder‐managed eucalyptus‐based agroforestry (EBAF) has expanded, reshaping land‐use patterns and tree cover outside forests. This study examines the spatial interactions and spillover effects of socioeconomic and climatic drivers on EBAF expansion across 35 districts in Ethiopia from 1990 to 2024, with natural forest cover, normalized difference vegetation index (NDVI), and ecosystem service values (ESV) analyzed as complementary outcomes. Using remote sensing data and spatial econometric models, we find strong spatial dependence (0.599) in EBAF. Population density (0.0001), elevation, and mean annual temperature (0.332) significantly promote EBAF expansion, while rainfall and urbanization exert opposite effects. Climate spillovers, particularly rising maximum temperatures (−0.784), hurt dense natural forests. NDVI and ESV hotspots are concentrated in the southern highlands; degradation in northern districts is linked to declining rainfall and economic pressure. As a robustness check, we incorporated year‐specific Gi* hotspot indicators and alternative spatial weight matrices into the spatial econometric models. The results confirm that the estimated spatial spillovers remain stable and are consistent with the rook contiguity matrix. Overall, the results indicate that EBAF expansion is the dominant land‐use response to demographic, urban, and climatic pressures, with broader implications for vegetation condition and ecosystem services. Incorporating spatial spillover effects into Ethiopia's Climate‐Resilient Green Economy and Green Legacy initiatives can improve the targeting of agroforestry incentives, reforestation efforts, and ecosystem restoration, supporting both livelihood resilience and long‐term environmental sustainability.