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Title:Boda-bodas rule: Non-agricultural activities and their inequality implications in Western Kenya PDF Logo
Authors:Lay, Jann
M'Mukaria, George Michuki
Omar Mahmoud, Toman
Issue Date:2007
Series/Report no.:Proceedings of the German Development Economics Conference, Göttingen 2007 / Verein für Socialpolitik, Research Committee Development Economics 20
Abstract:Diversification into non-agricultural activities in rural areas can be broadly classified as either survival-led or opportunity-led. The existence of these two types of non-agricultural activities implies a U-shaped relationship between the share of income derived from non-agricultural activities and household wealth as well as total household income. Survival-led engagement in non-agricultural activities would be inequality-decreasing through increasing the incomes of the poorer parts of the population and would reduce poverty. Opportunity-led diversification, by contrast, would increase inequality and have a minor effect on poverty, as it tends to be confined to non-poor households. Using data from a household survey conducted by ourselves in Western Kenya, we find the overall share of non-agricultural income in this very poor region to be important, but below the sub-Saharan African average. Multivariate analyses confirm the existence of both survival-led and opportunity-led diversification. Yet, the poverty and inequality implications of the differently motivated diversification strategies differ somewhat from our expectations. As expected, we find high-return activities to be confined to richer households, while both rich and poor households are engaged in low-return activities. Very poor households even appear to be excluded from the latter. Simple simulation exercises illustrate the inequality-increasing and very limited poverty effects of increases in high-return income, whereas increased low-return income shows substantial poverty reduction leverage. Our findings indicate that rural households do not only face asset constraints, but also very limited or relatively risky high-return opportunities outside agriculture.
Subjects:Income diversification
Non-agricultural activities
Inequality
JEL:I31
O17
Q12
Document Type:Conference Paper
Appears in Collections:Proceedings of the German Development Economics Conference, 2007 (Göttingen)
Publikationen von Forscherinnen und Forschern des IfW

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