Rural Development Policies and Sustainable Land Use in the ...

METHODS AND MODELS 23
Natural capital reflects the household’s endowment
of natural resources and includes
land, water, forests, marine resources, air
quality, erosion protection, and biodiversity.
Human capital reflects the stock of human
skills and knowledge in the household and
includes education, skills, knowledge, health,
nutrition, and labor power. Physical capital
includes transportation, buildings, shelter,
water supply and sanitation, energy, technology,
and communications. Roads are also
often included but because they are hardly
influenced by household decisionmaking,
we treat roads as one element of our geographic
determinants of comparative advantage.
On the other hand, we include livestock
as part of physical capital, the main
justification being that a household’s ownership
of livestock is likely to influence the
productivity of both its land and labor resources,
just as machinery, equipment, and
transportation do. 23 Financial capital includes
savings, credit, and transfers and remittances.
Finally, social capital is embodied
in human relationships and includes any networks
that increase trust, ability for cooperation,
access to opportunities, informal safety
nets, and membership in organizations.
Given the available information in our
household data set and secondary data
sources, we necessarily adapt and narrow
these broad asset definitions and use the
following working definitions of each type
of asset (or capital):
• Natural capital is represented by the
amount of land (farm size), climate as
defined by rainfall and temperature
(approximated by altitude), soil water
deficits, quality of the land (as defined
by soil fertility and slope), land tenure,
and conservation investments.
• Human capital is represented by the
size and composition of the household,
with the latter determining the dependency
ratio and, together with farm
size, the land/labor ratio; level of formal
education of its members, age and
sex of the household head, percentage
of female adults, migrated household
members, and ethnicity. We did not
collect data on human health.
• Physical capital includes non-land
physical assets including machinery,
equipment, and transportation assets
and livestock.
• Financial capital includes transfers
(remittances and other cash transfers),
credit, and savings.
• Social capital includes membership in
various types of organizations and programs
including training and extension
programs, producer organizations,
23
In DFID’s sustainable livelihoods guidance sheets (www.livelihoods.org/info/guidance_sheets_pdfs/), livestock is
not mentioned under any of the types of capital, possibly reflecting some uncertainty as to how to classify livestock.
According to the Oxford Advanced Learner’s Dictionary of Current English (Hornby 1974), capital is
“wealth/money/property that may be used for the production of more wealth.” Livestock clearly fit this definition
because they are durable assets used as a store of wealth and to generate income and capital gains. The concept
of livestock as a stock of capital is distinct from the flow of goods and services that can be provided by livestock,
such as draught power, manure, milk, eggs, meat, hides, and so forth, and should not be confused with production
or sales of livestock products and services (just as the goods and services produced by equipment are distinct
from the equipment itself). Although some authors see livestock as part of natural capital (e.g., Quisumbing and
Meinzen-Dick 2001), we do not see any compelling reasons for this classification. Livestock are living beings,
but this does not seem to justify classifying them as natural capital (human beings are also living beings, but they
and their capabilities are classified under human capital). Livestock seem more appropriately classified as physical
capital, which is capital produced and reproduced by people for productive purposes. Although natural capital
such as land also has productive purposes, for the most part it is not produced and does not exist mainly for
the purpose of contributing to agricultural income (with some exceptions), as do livestock and farm equipment.
Livestock also commonly serve a role as a form of savings, so one could also argue that they should be classified
as financial capital. These issues point out some of the lack of clarity in the definitions of the concepts used in
the traditional sustainable livelihoods framework.