Rural Income Generation and Diversification - A Case Study ... - Doria

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Rural non-farm activities are limited in extent, versatile and often informal, and as such the
responsibility for their enhancement does not clearly fall under any specific institution or
government administrative branch. Non-farm income constituted an average 30 per cent of
the households' total income in the study area, and therefore has the potential to contribute to
poverty reduction. Public rural-development measures, such as investment in roads, education
and health services, would increase people’s human and physical capacity to seize the
opportunities, both on-farm and off-farm. The enhancement of land registration could encourage
smallholders to invest in productivity increases, and improved rural finance mechanisms
would support both agricultural and other activities. Furthermore, the collection of information
on the status of rural income sources would help in assessing the impact of policy
measures and investments in rural development.
Some topics for further research emerge from the results. Understanding intra-household decision-making
and gender roles would facilitate better targeting of policy measures. No information
on labour allocation was collected for the present study. There is therefore a need
to investigate the use of labour, preferably disaggregated by household member in order to
facilitate analysis of the returns.
Another topic for further research would be to analyse the availability of non-farm opportunities
and the associated entry barriers, as well as to investigate existing rural institutions and
public and private organisations and structures. This would better illustrate the operating environment
of rural households and complement the picture of their income-generation potential.
The obvious reluctance the engage in collective economic action also raises questions
and a study on social capital at the community level would therefore shed light on important
issues for the future.
Since risk attitudes are assumed to influence diversification decisions, a system for measuring
household risk attitudes and behaviour would be beneficial in terms of allowing the inclusion
of the risk factor in future analyses. Although challenging to collect, having information
on household-consumption patterns would have made some of the analyses easier.
The agricultural household model and econometric methods provide an appropriate basis on
which to discuss and analyse at least some elements of rural income generation and diversification,
although some of the assumptions attached to them need to be adjusted to fit various
country- and area-specific conditions better. The rural livelihoods framework reveals other
important determinants of income diversification apart from household characteristics and
given the results of this study, they would deserve more attention.