Non-farm household enterprises in Uganda: participation, survival and effect on agriculture commercialization

Abstract

Non-farm household enterprises constitute an important source of income for many households in Uganda, yet they remain underrepresented in development policy and empirical research. This is despite their relevance to poverty reduction and structural transformation, particularly in a context where agricultural households are expected to transition from subsistence to commercial production. In recent years, government interventions have increasingly targeted household enterprises, but evidence on participation, enterprise survival, and the implications of non-farm income for agricultural commercialisation remains limited. This dissertation examines these issues using nationally representative household survey data. The first two empirical analyses draw on cross-sectional household data, while the final analysis uses panel data (a “wave”) on agricultural households. The first empirical analysis investigates the determinants of household participation in non-farm enterprises using a logit model. The results indicate that participation is associated with household characteristics such as marital status, education, region, and access to finance. Participation is lower in the eastern and western regions relative to the central region, and individuals with higher levels of formal education are less likely to engage in non-farm enterprises. This highlights the importance of financial access and regional disparities in shaping livelihood choices. The second empirical analysis examines the factors responsible for survival of non-farm household enterprises using survival analysis methods. The findings show that enterprise exit is most pronounced in the early years of operation, after which survival rates stabilise. Enterprises owned by women and those engaged in agriculture-related activities face a higher risk of exit, suggesting gender- and sector-specific constraints that affect enterprise longevity. The final empirical analysis assesses the relationship between non-farm household enterprise income and agricultural commercialisation among farming households using a logit model. The results show that households earning non-farm enterprise income are less likely to commercialise agricultural production. This finding is consistent with the income-effect hypothesis, which posits the effect of specialization in non-farm household enterprises. Therefore, an increase in off-farm income may negatively affect market supply by increasing household demand for their products. Overall, the dissertation provides empirical evidence on the role of non-farm household enterprises, highlighting critical trade-offs between income diversification and agricultural commercialisation. The findings have implications for the design of enterprise support and agricultural development policies. Subject keywwords; Agriculture commercialization, Non-farm household enterprises, Uganda