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Livelihood diversification strategies in the Himalayas

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  • Dil Bahadur Rahut
  • Maja Micevska Scharf

Abstract

This article examines livelihood diversification strategies of rural households using survey data from the Himalayas. We present and explore an analytical framework that yields different activity choices as optimal solutions to a simple utility maximization problem. By classifying the range of activities of rural households into a few distinct categories based on their profitability and by considering portfolios of farm and nonfarm activities, we provide novel insights into diversification behaviour of rural households. The evidence shows that while the poor are mainly agricultural labourers and work in the low-return non-farm sector, the better-off diversify in high-return nonfarm activities. As expected, we find strong evidence that education plays a major role in accessing more remunerative non-farm employment. A somewhat less intuitive finding is that larger household size is associated with higher probability of diversification into the high-return non-farm sector. The finding that the farm size is not a constraint to diversification in lucrative non-farm employment is also surprising. Geographical location plays a role in diversification behaviour of rural households indicating the importance of local context.
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Suggested Citation

  • Dil Bahadur Rahut & Maja Micevska Scharf, 2012. "Livelihood diversification strategies in the Himalayas," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 56(4), pages 558-582, October.
  • Handle: RePEc:bla:ajarec:v:56:y:2012:i:4:p:558-582
    DOI: j.1467-8489.2012.00596.x
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    References listed on IDEAS

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    2. Escobal, Javier, 2001. "The Determinants of Nonfarm Income Diversification in Rural Peru," World Development, Elsevier, vol. 29(3), pages 497-508, March.
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    7. Meenakshi, J. V. & Ray, Ranjan, 2002. "Impact of household size and family composition on poverty in rural India," Journal of Policy Modeling, Elsevier, vol. 24(6), pages 539-559, October.
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    10. Maja Micevska & Dil Bahadur Rahut, 2008. "Rural Nonfarm Employment and Incomes in the Himalayas," Economic Development and Cultural Change, University of Chicago Press, vol. 57(1), pages 163-193, October.
    11. Bryceson, Deborah Fahy, 2002. "The Scramble in Africa: Reorienting Rural Livelihoods," World Development, Elsevier, vol. 30(5), pages 725-739, May.
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    Cited by:

    1. Dil Bahadur Rahut Chhetri & Pradyot Ranjan Jena & Akhter Ali & Bhagirath Behera & Nar Bahadur Chhetri, 2015. "Rural Nonfarm Employment, Income, and Inequality: Evidence from Bhutan," Asian Development Review, MIT Press, vol. 32(2), pages 65-94, September.
    2. Solomon Zena Walelign & Mariève Pouliot & Helle Overgaard Larsen & Carsten Smith-Hall, 2015. "A novel approach to dynamic livelihood clustering: Empirical evidence from Nepal," IFRO Working Paper 2015/09, University of Copenhagen, Department of Food and Resource Economics.

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