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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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  • Ralitza Dimova & Kunal Sen, 2010. "Is household income diversification a means of survival or a means of accumulation? Panel data evidence from Tanzania," Global Development Institute Working Paper Series 12210, GDI, The University of Manchester.
    • 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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    1. Tshikala, Sam Kaninda & Fonsah, Esendugue Greg, 2018. "Analysis Of The Impact Of Migrations And Remittances On Income Diversification In Rural Africa: A Case Study Of Kenya," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266703, Southern Agricultural Economics Association.
    2. Ira N. Gang & Kunal Sen & Myeong-Su Yun, 2017. "Is Caste Destiny? Occupational Diversification among Dalits in Rural India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(2), pages 476-492, April.
    3. Md.Salamun Rashidin & Sara Javed & Bin Liu & Wang Jian, 2020. "Ramifications of Households’ Nonfarm Income on Agricultural Productivity: Evidence From a Rural Area of Pakistan," SAGE Open, , vol. 10(1), pages 21582440209, January.
    4. Anviksha Drall & Sabuj Kumar Mandal, 2020. "Determinants of various modes of rural non-farm sector (RNFS) employment in SAT (semi-arid tropics) and Eastern regions of India: an empirical analysis," Indian Economic Review, Springer, vol. 55(2), pages 253-282, December.
    5. Asfaw, Solomon & Savastano, Sara, 2015. "Topic: Building Resilience to Climate Change Through Social Protection and Climate-Smart Agriculture: Synergies and Trade-offs," 2015 Conference, August 9-14, 2015, Milan, Italy 210963, International Association of Agricultural Economists.
    6. Alobo Loison, Sarah & Hillbom, Ellen, 2020. "Regional evidence of smallholder-based growth in Zambia’s livestock sector," World Development Perspectives, Elsevier, vol. 19(C).
    7. Asfaw, Solomon & Scognamillo, Antonio & Caprera, Gloria Di & Sitko, Nicholas & Ignaciuk, Adriana, 2019. "Heterogeneous impact of livelihood diversification on household welfare: Cross-country evidence from Sub-Saharan Africa," World Development, Elsevier, vol. 117(C), pages 278-295.
    8. Gamel Abdul-Nasser Salifu, 2019. "The Political Economy Dynamics of Rural Household Income Diversification: A Review of the International Literature," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 273-290, December.
    9. Szirmai A. & Gebreeyesus M. & Guadagno F. & Verspagen B., 2013. "Promoting productive employment in Sub‐Saharan Africa : a review of the literature," MERIT Working Papers 2013-062, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    10. Olabimtan Adebowale & David Lawson, 2018. "Does access to formal finance matter for stimulating entrepreneurship in developing countries? Evidence from non-farm entrepreneurial activities in Nigeria," Global Development Institute Working Paper Series 262018, GDI, The University of Manchester.
    11. Agyeman, Bernard Archibald Senyo & Asuming-Brempong, Samuel & Onumah, Edward Ebo, 2014. "Determinants of Income Diversification of Farm Households in the Western Region of Ghana," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 53(1), pages 1-18, February.
    12. Asfaw, Solomon & McCarthy, Nancy & Paolantonio, Adriana & Cavatassi, Romina & Amare, Mulubrhan & Lipper, Leslie, 2015. "Diversification, Climate Risk and Vulnerability to Poverty: Evidence from Rural Malawi," 2015 Conference, August 9-14, 2015, Milan, Italy 230216, International Association of Agricultural Economists.
    13. M.R. Motsholapheko & D.L. Kgathi & C. Vanderpost, 2012. "Rural livelihood diversification: A household adaptive strategy against flood variability in the Okavango Delta, Botswana," Agrekon, Taylor & Francis Journals, vol. 51(4), pages 41-62, December.
    14. Koirala, Krishna H. & Mishra, Ashok K. & Mehlhorn, Joey, 2014. "Using Copula to Test Dependency between Energy and Agricultural Commodities," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170364, Agricultural and Applied Economics Association.
    15. Drall, Anviksha & Mandal, Sabuj Kumar, 2021. "Investigating the existence of entry barriers in rural non-farm sector (RNFS) employment in India: A theoretical modelling and an empirical analysis," World Development, Elsevier, vol. 141(C).
    16. Johny, Judit & Wichmann, Bruno & Swallow, Brent, 2014. "Role of Social Networks in Diversification o Income Sources in Rural India," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170357, Agricultural and Applied Economics Association.
    17. Sènakpon F. A. Dedehouanou & John McPeak, 2018. "Diversify more or less? Household resilience and food security in rural Nigeria," Working Papers PMMA 2018-01, PEP-PMMA.
    18. Patrick Opoku Asuming, 2023. "Risk attitudes and asset diversification: Evidence from Ghana," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(5), pages 915-960, July.
    19. Bekele Gebisa Etea & Deyi Zhou & Kidane Assefa Abebe & Dessalegn Anshiso Sedebo, 2020. "Is income diversification a means of survival or accumulation? Evidence from rural and semi-urban households in Ethiopia," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(6), pages 5751-5769, August.
    20. Nazish KANWAL & Muhammad Ammad KHAN & Zhihao ZHENG, 2016. "Analyzing the determinants of non-farm income diversification of farm households in Peshawar district of Pakistan," Timisoara Journal of Economics and Business, West University of Timisoara, Romania, Faculty of Economics and Business Administration, vol. 9(1), pages 33-48, June.
    21. Sarah Alobo Loison, 2019. "Household livelihood diversification and gender: panel evidence from rural Kenya," Post-Print hal-02618651, HAL.

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