Smallholder diversification and income growth in Zambia

Economists studying rural Africa have found that as income-generating activities shift from agriculture to more diverse types of employment in other sectors, personal income and national economic indicators rise. Few large-scale studies, however, have tested this finding.

A 2011 study by the University of Gothenburg, Sweden, in the Journal of African Economies, “Smallholder Diversification and Income Growth in Zambia,” uses a nationally representative sample of approximately 5,000 households from Zambia’s Post-Harvest Survey in both 2001 and 2004 to examine how income is affected by diversification of economic activities. The authors categorize work into four general categories: farming, agricultural wage work, non-agricultural work, and own account businesses.

Key study findings include:

  • A positive association was found between cultivation of diverse income sources and increases in worker income. “Changing from being a full-time farmer household to a more diversified livelihood strategy raises the per laborer income in the range of 25-100%.”
  • Zambian households that adopted any income-generating work in additional to agriculture consistently enjoyed higher earnings than farming-only ones. Households employing a combination of farming, non-agricultural work and personal businesses saw average income increases of 200%; farming and non-agricultural households netted an average 145% increase in household income.
  • Similarly, transitioning from more diversified economic activities to less diversified ones at the household level was associated with a lower income per worker. “Starting in any activity combination other than farming, changing to farming led to a lower income in 2004.”
  • Land ownership, access to markets, and access to financing were crucial for fostering labor diversification. Landowners with smaller tracts also benefited from access to affordable human capital/farmer workers; those with more education were better positioned to capitalize on non-agricultural wage opportunities.
  • “Having a female household head makes it considerably less likely for a household to diversify into non-agricultural wage work and somewhat more likely to diversify into business.”  The authors suggest that this is due to limitations on mobility for women.

The authors conclude that moving to a more diversified pattern of income-generating activities has a positive effect on their livelihoods. The authors posit that priorities in development policy, therefore, “should be placed on measures to facilitate smallholder households’ assets, to develop the economic environment so that smallholders get better market access and to develop credit facilities that are accessible for smallholders.”

This article was originally published on Smallholder diversification and income growth in Zambia