Responding to an Income Shock through Increasing Forest Extraction: Survey Evidence from Ethiopian Coffee Farmers1

The worldwide turndown in coffee revenue to the majority of resource poor primary producers has become a serious threat to sustainable development. There is however inadequate knowledge with respect to mechanisms used by resource poor coffee farmers to stave off situations of economic hardship. Using cross-sectional household survey data from southwest Ethiopia, the present study investigates whether or not farmers use forests to even out variability associated with risky coffee income. A zero-inflated negative binomial model was used to explain farmer frequency of firewood collection trips as a response to income shock and risk in coffee farming. The empirical results indicate that a rise in household forest extraction effort for firewood is strongly associated with shortfalls in current coffee income and with income uncertainties prevailing in the coffee sector. The study draws policy implication from the perspectives of development and environment.