The Role of ICT Expenditure for Cash Crop Production and Income Generation in Southern Ethiopia

Previous studies indicate that cash crop producers in developing countries are, in comparison to other farmers, more inclined to spend a share of their income on information communication technologies (ICT). In some cases however, it is not known whether the larger cash crop producers are spending more on ICT because they are wealthier, or if the cash crop farms that make more use of ICT services have in the past been able to accumulate wealth faster. This paper attempts to understand this causality for the case of smallholder farmers in rural villages of southern Ethiopia. In the analysis, special emphasis is placed on the role of market participation and the role of investments into ICTs for household income generation. Results from Two Stage Least Square (2SLS) regressions indicated that income is the most significant driver of farmers’ spending behavior on ICT goods and services, while being a cash crop producer is the most important determinant of having a relatively high income. Thus, especially investment into mobile phones and cash crop production appear to be complementary.