Comparative analysis of income level in matched small farms with and without eucalyptus plantations in Senan, Ethiopia

Abstract

The cultivation of eucalyptus trees is a widely practiced economic activity in the highlands of the Amhara region, Ethiopia. This study investigates the causal impact of eucalyptus plantation ownership on household income within the Senan District of Ethiopia. Using cross-sectional data from 332 rural households, comprising 166 households with eucalyptus plantations and 166 without, the study employed a two-sample t-test comparison to compare the income level of households in the two groups. To identify the key factors influencing household income, the study conducted a Principal Component Analysis (PCA) and Propensity Score Matching (PSM) to isolate the causal impact of eucalyptus plantations on household income. This involved estimating propensity scores using a binary logistic regression model. The Average Treatment Effect on the Treated (ATT) analysis revealed that households that plant eucalyptus trees had 40.2 % higher total household income than those that did not participate in such activities. Therefore, considering potential demand and market fluctuations, eucalyptus tree growers need to diversify their livelihood strategies by utilizing the income generated from their plantations.