Land tenure security has long been touted as key to increased performance of the agricultural sector in developing countries. At the same time, off-farm employment is seen as a strategy to diversify rural economies.
This paper utilizes household level panel data to analyse the impact of a land certification program on farmers’ off-farm participation and activity choices in the Central Highlands of Ethiopia. Identification of the program’s impact relies on the sequential nature of its implementation and application of the Difference-in-Differences strategy. Our results suggest that certification is a significant determinant of participation in off-farm employment. However, the impact differs substantially between different types of off-farm activities. While land certification is associated with an increased probability of participation in non-agricultural activities requiring unskilled labor, it reduces the probability of engaging in work on others’ farms. In addition, the effect of the program depends on the size of landholdings. The differences in the responsiveness of different off-farm activities to both certification and farm size indicate the need to recognize the complex relationships between reform policies that enhance land tenure and the non agricultural sub-sector in rural areas. In light of similar previous studies, the major contributions of the paper are twofold: assessment of the effects of enhanced land tenure security on activities outside agriculture and evaluation of the role of farm size in determining off-farm participation.