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Income diversification in Zimbabwe : welfare implications from urban and rural areas

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  • Ersado, Lire

Abstract

The author examines, taking into account the urban-rural divides, the changes and welfare implications of income diversification in Zimbabwe following macroeconomic policy changes and droughts of the early 1990s. Data from two comparable national income, consumption and expenditure surveys in 1990-91 and 1995-96, which straddled a period of economic volatility and natural disasters, show that the percentage of households earning income from private and informal sources grew considerably, while that from government and formal sources declined in the aftermath of the drought and policy changes. The author finds that, in general, rural households tend to have a more diversified portfolio of income compared with their urban counterparts, and the degree of diversification decreases with the level of urbanization. However, there are important differences in the level of diversification within the rural and urban areas depending on wealth: While the relatively better-off households have a more diversified income base in rural areas, it is the poor who pursue multiple income sources in urban areas. A decomposition of changes in welfare indicates that the total contribution of income diversification is large and increased between 1990-91 and 1995-96 in both urban and rural areas. On the other hand, there were significant declines in returns to human and physical capital assets during the same period. The findings suggest that households with a more diversified income base are better able to withstand the unfavorable impacts of the policy and weather shocks. The fact that relatively better-off households have a more diversified income base following the shocks implies that the poor are more vulnerable to economic changes unaccompanied by well-designed safety nets.

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  • Ersado, Lire, 2006. "Income diversification in Zimbabwe : welfare implications from urban and rural areas," Policy Research Working Paper Series 3964, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3964
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    2. Zereyesus, Yacob A. & Embaye, Weldensie T. & Tsiboe, Francis & Amanor-Boadu, Vincent, 2017. "Implications of Non-Farm Work to Vulnerability to Food Poverty-Recent Evidence From Northern Ghana," World Development, Elsevier, vol. 91(C), pages 113-124.
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    5. Maksim Yemelyanau, 2009. "Second agriculture in Belarus and Ukraine:subsistence or leisure?," BEROC Working Paper Series 08, Belarusian Economic Research and Outreach Center (BEROC).
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    7. Shiba Shankar Pattayat & Jajati Keshari Parida & I. C. Awasthi, 2022. "Reducing Rural Poverty Through Non-farm Job Creation in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 65(1), pages 137-160, March.
    8. Chikweche, Tendai & Fletcher, Richard, 2010. "Understanding factors that influence purchases in subsistence markets," Journal of Business Research, Elsevier, vol. 63(6), pages 643-650, June.
    9. Truong Lam Do & Trung Thanh Nguyen & Ulrike Grote, 2019. "Nonfarm employment and household food security: evidence from panel data for rural Cambodia," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 11(3), pages 703-718, June.
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    11. Alexander, K.A. & Ramotadima, M. & Sanderson, Claire E., 2018. "The power of consensus: Developing a community voice in land use planning and tourism development in biodiversity hotspots," Ecosystem Services, Elsevier, vol. 30(PC), pages 350-361.
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    13. Olubunmi O Alawode & Isaac B Oluwatayo & Afusat O Abdullahi, 2017. "Income Diversification, Inequality and Poverty among Rural Households in Oyo State, Nigeria," Journal of Economics and Behavioral Studies, AMH International, vol. 9(5), pages 83-92.
    14. Ham Kimkong & Buapun Promphakping & Harri Hudson & Samantha C. J. Day & Ly Vouch Long, 2023. "Income Diversification and Household Wellbeing: Case Study of the Rural Framing Communities of Tang Krasang and Trapang Trabek in Stung Chreybak, Kampong Chhnang, Cambodia," Sustainability, MDPI, vol. 15(14), pages 1-17, July.
    15. Bauer, Jan M. & Mburu, Samuel, 2017. "Effects of drought on child health in Marsabit District, Northern Kenya," Economics & Human Biology, Elsevier, vol. 24(C), pages 74-79.
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    23. Lourdes Diaz Olvera & Didier Plat & Pascal Pochet, 2015. "Assessment of mobility inequalities and income data collection. Methodological issues and a case study (Douala, Cameroon) [Evaluation des inégalités de mobilité et recueil des revenus. Questions mé," Post-Print halshs-01235185, HAL.

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    Keywords

    Rural Poverty Reduction; Inequality; Poverty Diagnostics; Economic Theory&Research;
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