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Determinants of Farmers' Participation in Coffee

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Determinants of Farmers' Participation in Coffee DETERMINANTS OF FARMERS’ PARTICIPATION IN COFFEE PRODUCTION AND MARKETING (THE CASE OF OYDA WOREDA IN GAMMOGOFA ZONE SOUTHERN NATIONS NATIONALITIES AND PEOPLES REGIONAL STATE) MSc THESIS TENKIR TENKA JUNE, 2016 ARBA MINCH, ETHIOPIA 1 DETRMINANTS OF FARMERS’ PARTICIPATION IN COFFEE PRODUCTION AND MARKETING (THE CASE OF OYDA WOREDA IN GAMMOGOFA ZONE SOUTHERN NATIONS NATIONALITIES AND PEOPLES REGIONAL STATE) TENKIR TENKA A THESIS SUBMITTED TO THE DEPARTMENT OF ECONOMICS, COLLEGE OF BUSSINESS AND ECONOMICS, SCHOOL OF GRADUATE STUDIES, ARBA MINCH UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN ECONOMICS (ECONOMIC POLICY ANALYSIS) JANUARY, 2016 ARBA MINCH ETHIOPIA 2 DECLARATION I hereby declare that this M.Sc. thesis is my original work and has not been presented for a degree in any other university, and all sources of material used for this thesis have been duly acknowledged. Name: TENKIR TENKA MAMO Signature: _________________________ Date: June, 2016 i ADVISORS’ THESIS SUBMISSION APPROVAL SHEET PAGE SCHOOL OF GRADUATE STUDIES ARBA MINCH UNIVERSITY This is to certify that the thesis entitled “Determinants of Farmers’ Participation in coffee Production and Marketing (The case of OydaWoreda in GammoGofa Zone Southern Nations Nationalities and Peoples Regional State)” submitted in partial fulfillment of the requirements for the degree of Master’s with specialization in Economic Policy Analysis, the Graduate Program of the Department of Economics and has been carried out by TenkirTenkaId. No RMSc/161/06, under our supervision. Therefore, we recommend that the student has fulfilled the requirements and hence hereby can submit the thesis to the department for defense. __________________ __________ _____________ Name of Principal advisor Signature Date _______________ _______________ _________ Name of co-advisor Signature Date ii EXAMINERS’ THESIS APPROVAL SHEET SCHOOL OF GRADUATE STUDIES ARBA MINCH UNIVERSITY We, the undersigned, members of the Board of Examiners of the final open defense by TenkirTenka have read and evaluated his thesis entitled “Determinants of Farmers’ Participation in coffee Production and Marketing (The case of OydaWoreda in GammoGofa Zone Southern Nations Nationalities and Peoples Regional State” and examined the candidate’s oral presentation. This is, therefore, to certify that the thesis has been accepted in partial fulfillment of the requirements for the degree of Master of Science in Economics. ___________________ ___________ ___________ Name of the Chairperson Signature Date ___________________. ___________ ___________ Name of Principal Advisor Signature Date _______________. ___________ ___________ Name of Co-Advisor Signature Date _______________ ___________ ___________ Name of External examiner Signature Date _______________ ___________ ___________ Name of internal examiner Signature Date ___________ ___________ _________ SGS Approval Signature Date iii ACKNOWLEDGEMENTS Above all, I would like to forward my deepest gratitude to almighty God and his mother, St., Virgin Merry, for helping me to accomplish my will. No word of thanks and gratitude is sufficient to appreciate them have done for me. By their decree, this paper came out as a result of the contribution and support of many individuals whom I am greatly indebted to. I really want to express my greatest thanks to my advisor Dr. Tora Abebe for his patience and constructive advice throughout the development of this thesis without which this paper would have been lost. Besides, my special gratitude goes to my Co-advisor Mr. Sileshi Abebe for his remarkable advices and encouragements throughout the course of the study. I would like to warmly acknowledge my sponsor, Oydaworeda Chief Administration Office, for its full sponsorship. I want to extend my deepest gratitude to Oydaworeda Finance and Development Office, Agricultural Development Office, and Educational office for material support. Lastly, I would like to thank my family and friends: To my wife Hawa Oumer for her support and love throughout the year; my daughters and son thank you so much for always being willing to help me out and for your love. iv Acronyms AD After Death CC Contingency Coefficient DHM Double Hurdle Model ECX Ethiopian Commodities Exchange FAO Food and Agriculture Organization FOB Free On Board GDP Gross Domestic Product GGZADR Gamo Goffa Zone Agricultural Department Report GTP Growth and Transformation Plan MARD Ministry of Agriculture and Rural Development MOFED Ministry Of Finance and Economic Development MOT Ministry Of Trade NGO Non Governmental Organization OWAO OydaWoreda Agricultural Office PAERT Policy Analysis and Economic Research Team PASDEP Plan for Accelerated and Sustained Development to End Poverty PLCTC Primary Level Coffee Transaction Centers SNNPR South Nation Nationalities and People Regional state SSA Sub-Saharan Africa USAID United States Agency for International Development VAT Value Add Tax VIF Variance Inflator Factor v Table of Contents ACKNOWLEDGEMENTS ............................................................................................................ iv Acronyms ......................................................................................................................................... v Table of Contents ............................................................................................................................ vi LIST OF TABLES ........................................................................................................................ viii LIST OF FIGURES ......................................................................................................................... ix ABSTRACT ....................................................................................................................................... x CHAPTER ONE ............................................................................................................................... 1 INTRODUCTION ............................................................................................................................ 1 1.1 Background of the study ......................................................................................................... 1 1.2 Statement of the Problem ....................................................................................................... 4 1.3. Objective of the study ............................................................................................................ 6 1.4. Hypothesis of the Study: ....................................................................................................... 6 1.5. Significance of the Study....................................................................................................... 7 1.6. Scope and Limitation of the Study ........................................................................................ 7 1.7. Organization of the Study ...................................................................................................... 7 CHAPTER TWO .............................................................................................................................. 8 LITERATURE REVIEW ................................................................................................................. 8 2.1. Theoretical Literature ............................................................................................................ 8 2.1.1 The definition of Cash crops and its Cropping by Smallholder Farmers in Developing Countries .................................................................................................................................. 8 2.1.2 Coffee Production and Marketing in Ethiopia ............................................................... 10 2.1.3. Coffee marketing in Ethiopia ....................................................................................... 13 2.2 Empirical Literature.............................................................................................................. 16 2.2.1. Determinants of Farmers’ Participation in Production and Marketing of coffee. ........ 16 CHAPTER THREE ........................................................................................................................ 21 METHODOLOGY ......................................................................................................................... 21 3.1. Description of the Study Area ............................................................................................. 21 vi 3.2. Data Type and Source ......................................................................................................... 21 3.3 Population of the Study ........................................................................................................ 23 3.4 Sampling Techniques ........................................................................................................... 23 3.5 Sample Size .......................................................................................................................... 23 3.6 Data Collection Techniques and Instruments ....................................................................... 24 3.7 Model Specification.............................................................................................................. 25 3.7.1. Method of Data Analysis and Respective Empirical Models ....................................... 25 3.8. Statistical and
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