Impact of Sub Watershed Management Program on Household Livelihoods of Humbo District in Southern Ethiopia: Instrumental Variable Approach

This study is aimed at assessing effect of watershed management program on livelihood of households of selected sub watersheds in Humbo District. To carry out the study objectives, from econometrics models instrumental variable (IV) method was applied from among different impact evaluation methods with the sample size of 330 households. The results of econometric estimation revealed that household age, education, adoption, consumption expenditure, material possession, extension contact, productivity of crops, upstream and downstream and employment were positively and significantly related with HHDI at 1%, 5% and 10% level of significance. To examine the validity of instrumental variables estimation, different diagnosis tests like normality tests of the model, endogeneity test, tests of weak instruments, tests of over identifying restriction, multicollinearity and heteroskedasticity were employed. After identification and testing of IV result, the 2SLS estimation was conducted for evaluating Impact. Accordingly, adoption of watershed program has positive and significant impact (31%) on HHDI of the sample households in the study area. Therefore, the result indicate that with adoption of watershed management program, household on livelihoods can improve.