Productivity impacts of crop commercialization and diversification among smallholder farmers in central and Southern Oromia, Ethiopia

Agricultural commercialization and crop diversification are widely promoted as strategies for improving agricultural productivity and rural transformation in Ethiopia. However, their levels remain low, and evidence on their productivity effects is still limited. This study examines the impact of cereal crop commercialization and diversification on agricultural productivity in the central and southern Oromia regions of Ethiopia. The analysis uses primary survey data collected from 685 households and applies an ordered logit endogenous switching (OL-ESR) regression model. In addition, OLS estimation is used to check the robustness of the results obtained from the OL-ESR model. The results indicate that commercialization and diversification significantly enhance agricultural productivity. Households with higher levels of commercialization and diversification achieve better productivity outcomes than those with lower levels. Furthermore, productivity gains increase progressively from medium to high commercialization and diversification, indicating that greater market participation and diversification encourage farmers to adopt more efficient and profit-oriented practices. The study underscores the need for a comprehensive policy framework and strategy that treats commercialization and diversification as parallel and mutually reinforcing pathways for productivity growth. Policy actions must prioritize expanding mechanization and small-scale irrigation to mitigate labor and climatic constraints, while strengthening rural institutions to improve market information access. Most importantly, a strategic focus on land resource optimization, livestock development, and continuous human capital investment is essential for sustaining these gains and fostering long-term agricultural transformation.