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Is household income diversification a means of survival or a means of accumulation? Panel data evidence from Tanzania

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  • Ralitza Dimova
  • Kunal Sen

Abstract

What drives income diversification among rural households in developing countries? A large literature has examined whether household income diversification is a means of survival or a means of accumulation, which has so far remained inconclusive. This paper attempts to evaluate which explanation of household income diversification – diversification as survival or diversification as accumulation – stands up to empirical scrutiny. We use household panel data from Tanzania of approximately 800 households for four years and use fixed and random effects models to sweep out unobserved households’ attitudes to risk that may be correlated with household income diversification behaviour. We also use instrumental variable methods to address the possibility of reverse causality and that the household’s income status may be endogenous to its diversification behaviour. Our results suggest that the ‘diversification as accumulation’ motive of household income diversification seems to have stronger empirical validity in the Tanzanian context.

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File URL: http://www.bwpi.manchester.ac.uk/medialibrary/publications/working_papers/bwpi-wp-12210.pdf
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Bibliographic Info

Paper provided by BWPI, The University of Manchester in its series Brooks World Poverty Institute Working Paper Series with number 12210.

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Date of creation: 2010
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Handle: RePEc:bwp:bwppap:12210

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  1. Joachim De Weerdt, 2010. "Moving out of Poverty in Tanzania: Evidence from Kagera," Journal of Development Studies, Taylor & Francis Journals, vol. 46(2), pages 331-349.
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Cited by:
  1. Szirmai, Adam & Gebreeyesus, Mulu & Guadagno, Francesca & Verspagen, Bart, 2013. "Promoting productive employment in Sub-Saharan Africa: A review of the literature," MERIT Working Papers 062, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Ira Gang & Kunal Sen & Myeong-Su Yun, 2011. "Is Caste Destiny? Occupational Diversification among Dalits in Rural India," Working Papers 309, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).

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