Cluster farming and household poverty extent: A causal mediation analysis of teff producers in Ethiopia

Background : Cluster farming (CF) has emerged as a promising collective and geographically concentrated approach in both developed and developing countries. Although CF has shown a significant effect on poverty reduction, the existing literature has overlooked the mechanisms that drive this effect. Methods : We applied a causal mediation analysis (CMA) to investigate how CF reduces the extent of household poverty among teff producers in Ethiopia using nationally representative data from CF-priority regions. The income approach, Foster–Greer–Thorbecke model, and t-test were also used. Results : CF participants had a 22% lower poverty headcount ratio, a 20% lower poverty gap, and a 17% lower poverty severity compared to non-participants in Ethiopia. We found mixed mean comparison results regarding the effect of CF on the extent of household poverty at the regional level. This implies that the performance of CF in reducing household poverty varies by region. The CMA results indicated that teff marketed surplus value (TMSV) negatively and significantly mediated the effect of CF on the poverty headcount ratio, poverty gap, and poverty severity. The indirect effect of CF on the extent of household poverty was greater than its total effect. Conclusion : This suggests that an increase in TMSV is a crucial mechanism through which CF reduces the extent of household poverty. Thus, promoting the integration of CF with market-oriented production supports poverty reduction efforts and transforms the subsistence production system in Ethiopia. Further studies should also be conducted using panel data, a multidimensional poverty index, a large sample size, and additional control variables to reinforce the findings of this study.