The role of nonfarm income in coping with the effects of drought in southern Mozambique

To reduce their dependence on subsistence agriculture, farm households in rural Africa may diversify their income sources by participating in the nonfarm sector. In years of drought, nonfarm income can also be part of the coping strategies. A multivariate sample selection model was used to analyze three years of data from a nationally representative household survey in Mozambique. The analysis was guided by the following three questions. During a drought year: (1) Do households increase their participation in nonfarm activities? (2) Are poorer households as likely as others to participate in and benefit from nonfarm activities? and (3) Which factors are associated with higher nonfarm incomes? The results suggest that households are more likely to engage in at least one nonfarm income‐generating activity during a drought year. Although poorer households are more likely to engage in nonfarm activities, they are less likely to participate in nonfarm activities of high return. The results suggest that policies reducing entry barriers (e.g., improved road infrastructure, micro‐credit schemes, and livestock promotion programs) and increasing education levels can facilitate income diversification, thus allowing rural households to better cope with the effects of drought. When designing polices, care must be taken to avoid exacerbating income inequality by targeting measures toward poorer and female‐headed households.