Life at the brink: Livelihood portfolios of the food insecure

Food security lags economic development, raising questions about whether food insecure households can leverage local economic development and livelihood diversif ication opportunities as effectively as their food secure counterparts. In a dynamic model incorporating production and utility risk, household consumption and livelihood portfolios depend on vulnerability, described by proximity to their stochastic minimum consumption threshold. Using granular data on smallholder farmers’ livelihood choices, the threshold effect is significant, with approximately 25% of household wealth allocated to satisfying the consumption threshold. Costly income smoothing strategies are most prevalent among the vulnerable and food insecure. However, results show that popular programs targeting livelihood diversification benefit primarily food secure households. In contrast, food safety net programs that directly reduce vulnerability carry the largest livelihood diversification benefits for food insecure households. These findings highlight the importance of reducing vulnerability to food insecurity, as it hinders smallholder farmers from accessing high-value market opportunities.