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Livelihood diversification strategies in the Himalayas

  • Dil Bahadur Rahut
  • Maja Micevska Scharf

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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File URL: http://hdl.handle.net/10.1111/j.1467-8489.2012.00596.x
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Article provided by Australian Agricultural and Resource Economics Society in its journal Australian Journal of Agricultural and Resource Economics.

Volume (Year): 56 (2012)
Issue (Month): 4 (October)
Pages: 558-582

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Handle: RePEc:bla:ajarec:v:56:y:2012:i:4:p:558-582
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  1. 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.
  2. Ferreira, Francisco H. G. & Lanjouw, Peter, 2001. "Rural Nonfarm Activities and Poverty in the Brazilian Northeast," World Development, Elsevier, vol. 29(3), pages 509-528, March.
  3. Lanjouw, Jean O. & Lanjouw, Peter, 2001. "The rural non-farm sector: issues and evidence from developing countries," Agricultural Economics, Blackwell, vol. 26(1), pages 1-23, October.
  4. Fafchamps, Marcel & Quisumbing, Agnes R., 1998. "Human capital, productivity, and labor allocation in rural Pakistan," FCND discussion papers 48, International Food Policy Research Institute (IFPRI).
  5. Lay, Jann & Mahmoud, Toman Omar & M'Mukaria, George Michuki, 2008. "Few Opportunities, Much Desperation: The Dichotomy of Non-Agricultural Activities and Inequality in Western Kenya," World Development, Elsevier, vol. 36(12), pages 2713-2732, December.
  6. J.V. Meenakshi & Ranjan Ray, 2000. "Impact of Household Size and Family Composition on Poverty in Rural India," ASARC Working Papers 2000-02, The Australian National University, Australia South Asia Research Centre.
  7. Wassie Berhanu & David Colman & Bichaka Fayissa, 2008. "Diversification and Livelihood Sustainability in a Semi-Arid Environment: A Case Study from Southern Ethiopia," Working Papers 200806, Middle Tennessee State University, Department of Economics and Finance.
  8. Lanjouw, Peter, 2001. "Nonfarm Employment and Poverty in Rural El Salvador," World Development, Elsevier, vol. 29(3), pages 529-547, March.
  9. Lim-Applegate, Hazel & Rodriguez, Gil & Olfert, M. Rose, 2002. "Determinants of non-farm labour participation rates among farmers in Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 46(1), March.
  10. Marcel Fafchamps & Agnes R. Quisumbing, 2003. "Social roles, human capital, and the intrahousehold division of labor: evidence from Pakistan," Oxford Economic Papers, Oxford University Press, vol. 55(1), pages 36-80, January.
  11. Escobal, Javier, 2001. "The Determinants of Nonfarm Income Diversification in Rural Peru," World Development, Elsevier, vol. 29(3), pages 497-508, March.
  12. 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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