This study examines the role of the rural labor market in reducing poverty and improving the well-being of smallholder farmers in rural Ethiopia. Propensity score matching technique is used to estimate the effect of labor market participation on poverty, consumption expenditure and income of smallholder farmers. The overall result indicates that the rural labor market contributes significantly to income growth, consumption expenditure and poverty reduction among smallholder farmers.

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... , participation in off-farm wage activity has a positive and significant effect on household consumption expenditure and income but a negative and significant effect on the likelihood of a household being poor.