Value addition is currently becoming an important topic in agricultural sector, especially for perishable agricultural products. The aim of this paper was to assess factors influencing urban and peri-urban dairy producers’ participation in milk value addition and volume of milk value added (VMVA) in Welmera Woreda. The study employed both primary and secondary data. The primary data were collected by structured questionnaires from 120 urban and peri-urban dairy producers, while the secondary data were gathered from different governmental and non-governmental organizations, from published and unpublished sources. The data were then analyzed using both descriptive (mean and standard deviation) and econometric model. Heckman’s two-step econometric model was used to identify factors affecting value addition participation (VAP) and VMVA. The result of the model shows that gender, age and education of household head, market distance, number of local milking cows and quantity of annual milk production affected the probability of participation in value addition positively in the first step. In the second step, sex of household head, income from non-dairy source, distance to market, number of local milking cows and quantity of annual milk production affected the VMVA positively, whereas number of children less than age of 6 years and number of crossbred milking cows had a negative influence on it. The finding implies that paying a special attention to female headed households will have a positive effect in participation in value addition. In addition, expanding rural education and arranging a mechanism for experience sharing among experienced and young farmers would have a positive effect. Better infrastructure and introduction of processing machines are also helpful for selling row milk and value addition, respectively.
Key words: Heckman’s two-step, urban, peri-urban, Welmera Woreda, Ethiopia.
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