Impact of irrigated agriculture on welfare of farm households in northern Ethiopia: panel data evidence*

The purpose of this study was to assess the impact of participating in irrigated agriculture on the welfare of smallholders in the semi-arid economy of northern Ethiopia. Two rounds of balanced panel data for the production seasons 2009/2010 and 2014/2015 collected from 407 smallholder farmers were analysed. Correlated random effect double hurdle models are used to estimate participation and extent of involvement in irrigated agriculture. The household fixed effect with a control function approach was used to assess the impact of participating in irrigated agriculture on welfare outcomes. The double hurdle model results indicate that households with at least one plot owned and located within the irrigation command area positively and significantly affect participation in irrigated agriculture. The fixed-effect model results also revealed that the area planted with use of irrigation enables smallholders to grow crops more than once a year; to ensure increased and stable production, income, consumption and asset accumulation positively. The finding of this study confirms that the potential role of irrigated agriculture is not limited to improving crop income and consumption of rural households, but also higher production from irrigated agriculture generates surplus products and better chance to integrate with the output market.