The impact of soil conservation and output diversification on farm income in Central American hillside farming

This article analyzes the determinants of farm income among hillside farmers participating in natural resource management projects in El Salvador and Honduras. The farm income function was evaluated using a system of equations in which income is determined simultaneously by the farmer's decision to adopt soil conservation technologies and by the level of diversification (number of agricultural activities) on the farm. The database used comes from surveys administered to 678 beneficiaries of these projects during 2002. The econometric results suggest that all the variables related directly to land use (i.e., output diversification, soil conservation practices and structures, and the adoption of forestry systems) have a positive and statistically significant association with farm income. Also, farmers who own land enjoy higher farm incomes than those who do not. The results indicate that when investing in natural resource management projects, governments and multilateral development agencies should pay close attention to output diversification, land tenure, and human capital formation as effective instruments in increasing farm income.     

Quantifying rural livelihood strategies in developing countries using an activity choice approach

This article uses a quantitative activity choice approach, based on identification of activity variables and application of latent class cluster analysis, to identify five major rural livelihood strategies pursued by households (n= 576) in Bolivia, Nepal, and Mozambique. Income sources and welfare outcomes are compared across strategies and household differences in asset holdings are analyzed using multinomial logit regression. Findings reveal that income diversification is the norm, that a higher degree of specialization does not characterize more remunerative livelihood strategies, that nonfarm income significantly contributes to higher income earnings, that environmental reliance does not vary across strategies, and that small‐scale farmers are the largest and poorest livelihood group. Some livelihood strategies are superior to all other strategies in terms of income earned; access to more remunerative livelihood strategies is determined by land ownership, education, and ethnic affiliation. Finally, the article also highlights that additional work is required to determine the most suitable methods for livelihood strategy identification.     

Agritourism and off‐farm work: survival strategies for small farms

This study considers agritourism and off‐farm work as income diversification choices simultaneously and analyzes factors influencing such choices. Further, the study assesses the impact of agritourism, off‐farm work, and both on gross cash farm income and total farm household income. We utilized large set of nationwide farm survey data and selectivity‐based multinomial choice model. An important finding of our study is that small farms have higher household income if they choose both income diversification strategies rather than a single strategy. Results suggest that education, age of the operator, financial condition, and location of the farm are important factors driving income diversification alternatives. Finally, our study indicates that accounting for selectivity is essential to ensure unbiased and consistent estimates.     

A model of shifting cultivation: can soil conservation reduce deforestation?

Shifting cultivators manage soil not only by adjusting soil use on already‐cleared lands, as in continuous cultivation, but also by clearing forests to obtain new fertile soils. This study examines the crucial link between on‐farm soil conservation and deforestation in shifting cultivation by modeling forest clearing as an investment in soil for a private farmer. More generally, by doing so the study attempts to integrate deforestation and soil conservation models which have been separately developed in the literature. Our policy goal is to arrest tropical deforestation—as destruction of global commons—caused by land degradation in shifting cultivation while improving the well‐being of poor shifting cultivators. Our integrated approach enables joint policy analyses of deforestation and land degradation. Three welfare‐enhancing policies are considered. The first is agricultural and nonagricultural subsidies affecting farm and nonfarm income opportunities. The second is fiscal and tenure policies affecting discount rates. Our question is whether the link between forest clearing and soil fertility alters the outcomes of these two standard macroeconomic policies commonly found in the literature. The third policy (or program) is various soil conservation measures affecting soil regeneration and erosivity on already‐cleared lands. This article examines a very important question which has received little attention in previous theoretical works: can soil conservation reduce deforestation? This study confirms anti‐deforestation effects of the promotion of nonfarming activities—a common and often emphasized finding in previous works—among shifting cultivators. More importantly, it also demonstrates that improving various soil conservation measures not only discourages forest clearing among shifting cultivators but also tends to have greater effects on forest protection than promoting nonfarming activities. Contrarily, agricultural price subsidy or technological progress gives rise to the opposite outcome, and lowering the farmer's discount rate or improving tenure security encourages him/her to clear more forests just to accumulate soil.     

Does human capital raise farm or nonfarm earning more? New insight from a rural Pakistan household panel

This study explores how human capital affects farm household earnings using two tools to refine measurement of human capital effects. First, it employs a two‐sector model to allow the allocation of family labor between farm and nonfarm activities. Second, it accounts for village fixed effects to evaluate whether results from panel data differ meaningfully from a cross‐sectional data analysis with local binary variables. The results show that education has a negligible effect on farm earnings; instead, experience appears to be the principal channel by which human capital affects agricultural performance in a traditional rural setting. Our results also suggest that prior models that fail to separate nonfarm activities spuriously exaggerated the effect of education to the farm sector. In addition, typical cross‐sectional analyses that ignore fixed effects may cause the effects of education on rural household earnings to be significantly overstated. The fact that panel data regressions accounting for village‐level fixed effects found only one instance of education raising earnings—the effect of literacy on nonfarm income—suggests that considerable heterogeneity may have been ignored in cross‐sectional data analyses, especially ones that omitted village‐level effects.     

Cash crop liberalization and poverty alleviation in Africa: evidence from Malawi

This article uses the case of burley tobacco liberalization in Malawi to investigate the efficacy of cash crop liberalization as an instrument for poverty alleviation in sub‐Saharan Africa. The principal justification for cash crop liberalization is that markets allow farm households to increase their incomes by producing that which provides the highest return to their productive resources and use the cash to buy consumption goods. Using a latent welfare model, we find that households that selected to grow cash crops had higher incomes than those that did not grow cash crops. However, we also find that due to the lumpiness and seasonality of cash crop incomes, higher household incomes, while increasing food purchases did not significantly affect per capita food intake. Irrespective of participation in cash crops, for much of the cropping season rural households seem to rely more on nonfarm income for expenditure and consumption smoothing.     

The impact of coffee price changes on rural households in Uganda

Employing household survey data covering the periods 1992–1993, 1995–1996, and 1999–2000, this article shows for the case of Uganda that a coffee market liberalization followed by a price boom was associated with substantial reductions in poverty, which could even be sustained when prices went down again. Coffee is not planted by the richest farmers and the gains from higher coffee prices accrued to poorer and richer coffee farmers alike. Nor were poorer farmers hurt disproportionately when prices fell. In addition, we find strong spillovers from coffee production to other agriculture, which tends to favor the poor, and to nonagricultural activities. These multiplier effects are concentrated in coffee regions. In an economic environment characterized by a booming agricultural sector, coffee farmers were able to accommodate the negative price shock, in particular through agricultural diversification. General agricultural growth also cushioned possible negative multiplier effects in coffee regions. Overall, the case of coffee in Uganda thus lends support to the view that agricultural trade liberalization is beneficial for the poor.     

Buffer stock savings by portfolio adjustment: evidence from rural India

The empirical literature on household savings tends to treat savings simply as the residual of income minus consumption. This article takes a unique approach to reconstruct the cash and asset balances using detailed household transaction data on farm households in rural India and generates monthly and seasonal ICRISAT panel data for the period 1976–1983. We have found that households—irrespective of their landholding status—cope with temporary shocks quite well by using crop inventory, currency, and capital assets, rather than livestock, as buffer assets. The importance of portfolio adjustments in smoothing consumption is also confirmed by the use of a system of equations in which both portfolio and production decisions are made endogenous. It is concluded that not only the level but also the diversification of household assets are important for buffering consumption. As an extension, we have explored the monthly ICRISAT panel data for the period 2009–2012 in the same villages and have found a similar pattern in household portfolio responses to income shocks.     

The impact of migration on rural poverty and inequality: a case study in China

Large numbers of agricultural labor moved from the countryside to cities after the economic reforms in China. Migration and remittances play an important role in transforming the structure of rural household income. This article examines the impact of rural‐to‐urban migration on rural poverty and inequality in a mountainous area of Hubei province using the data of a 2002 household survey. Since migration income is a potential substitute for farm income, we present counterfactual scenarios of what rural income, poverty, and inequality would have been in the absence of migration. Our results show that, by providing alternatives to households with lower marginal labor productivity in agriculture, migration leads to an increase in rural income. In contrast to many studies that suggest that the increasing share of nonfarm income in total income widens inequality, this article offers support for the hypothesis that migration tends to have egalitarian effects on rural income for three reasons: (1) migration is rational self‐selection—farmers with higher expected return in agricultural activities and/or in local nonfarm activities choose to remain in the countryside while those with higher expected return in urban nonfarm sectors migrate; (2) households facing binding constraints of land supply are more likely to migrate; (3) poorer households benefit disproportionately from migration.     

The adoption of intensive monocrop horticulture in southern Cameroon

Results from a 1997 survey of 208 households in the humid forest zone of southern Cameroon indicate that African policy makers seeking to intensify agricultural production should focus attention on the horticultural sub‐sector. The survey, which gathered information on horticultural production practices, found that the average expenditure on agro‐chemical inputs by horticultural producers using monocrop production systems was 190US$/ha, which greatly exceeds the FAO reported national average expenditure of 6.50 US$/ha. A logit model of monocrop adoption indicated that the size of land holding per household had a negative effect on adoption, congruent with population‐driven technical change and that increases in unit transportation costs significantly decreased the probability of adoption. These findings suggest that policy makers should target horticultural intensification in areas of higher population density and promote investment in rural roads. The age of the household head had a significant negative and elastic effect on adoption, which in combination with an increase in the cohort of younger farmers in the rural population induced by macro‐economic events contributed to the spread of intensified horticulture. In the study area, roughly two‐thirds of rural households also produce cocoa and the quantity of cocoa produced was positively associated with adoption of intensive horticultural systems suggesting that export crop promotion indirectly facilitated diversification of agriculture. Women's participation in intensive monocrop production was limited and efforts to promote their greater involvement are recommended.     

Poverty targeting, resource degradation and heterogeneous endowments—a micro-simulation analysis of a less-favored Ethiopian village

Persistent and widespread poverty in less-favored areas (LFAs) is attributed to fragile natural resources and poor markets. Limited assets may keep households outside the reach of poverty policies targeted at LFAs. We explored in a stylized manner the role of heterogeneous household assets for (1) policies aimed at poverty reduction; (2) within-village income inequality; and (3) soil erosion. With a farm-household micro-simulation model we analyzed for each household in a remote Ethiopian village three sets of policies: technology improvement, infrastructure investment, and off-farm employment through migration or cash for work (CFW) programs. Combating poverty with a single policy, migratory off-farm employment reduces the poverty headcount most. Because of self-selection, CFW programs performed best in terms of reaching the poorest of the poor. CFW also reduced within-village income inequality most, while a price band reduction increased income inequality. Only technology improvements resulted in a trade-off between poverty and soil erosion. Price band and off-farm employment policies reduced erosion while outperforming technology improvements in terms of poverty reduction. We found that combining two policies was most helpful in assisting poorer households to overcome the limitations of their asset endowments. A CFW program combined with reduced price bands yielded most in terms of poverty reduction and income inequality. This policy complementarity is, however, less important for better-endowed households. Reducing the reliance of households on agriculture offered a win-win situation of reducing poverty and maintaining natural resources. Combining policies helped to overcome asset limitations, to target policies to the poorest households and to reduce income inequalities.     

Mobile money,agricultural marketing,and off‐farm income in Uganda

Mobile money (MM) services can contribute to welfare gains in smallholder farm households. Previous research showed that one important pathway for these MM‐related welfare gains is through higher remittances received from relatives and friends. Here, the role of other impact pathways is examined, especially focusing on agricultural marketing and off‐farm economic activities. The analysis builds on panel data from smallholder coffee farmers in Uganda. Regression models show that the adoption of MM technology has contributed to higher household incomes and consumption levels. Off‐farm income gains are identified to be an important pathway, also beyond remittances. Typical off‐farm income sources are small businesses in trade, transport, and handicrafts, which benefit from novel savings and money transfer opportunities through MM. In terms of agricultural marketing, MM users sell a larger proportion of their coffee as shelled beans to buyers in high‐value markets, instead of selling to local traders immediately after harvest. MM services help to reduce cash constraints and facilitate transactions with buyers from outside local regions. In conclusion, MM can contribute to rural development through various important pathways. Analysis of adoption patterns suggests that MM services are socially inclusive.     

Impact of cooperatives on smallholders' commercialization behavior: evidence from Ethiopia

This article examines the impact of marketing cooperatives on smallholder commercialization of cereals using detailed household data in rural Ethiopia. We use the strong government role in promoting the establishment of cooperatives to justify the use of propensity score matching to compare households that are cooperative members to similar households in comparable areas without cooperatives. The analysis reveals that although cooperatives obtain higher prices for their members, they are not associated with a significant increase in the overall share of cereal production sold commercially by their members. However, these average results hide considerable heterogeneity across households. In particular, we find that smaller farmers tend to reduce their marketed output as a result of higher prices, whereas the opposite is true for larger farmers.     

China's booming livestock industry: household income, specialization, and exit

China's production of livestock products has generally kept pace with her rapidly increasing demand. Over-supply and market corrections for various livestock products took place over the latter part of the 1990s and large numbers of householders exited this type of production. Using household survey data, we estimate the relationship between a household's specialization in livestock production and household net income in 1995, and use a logit model to explore some predictors of household exit from livestock production over the following decade of market instability. We conclude that specialist livestock households with access to necessary skills, technologies, and markets increase their incomes from further livestock specialization in the base year, whereas those to whom livestock production is relatively unimportant can increase household incomes by diverting their resources away from animal husbandry. It was specialist rather than diversified livestock households that tended to bear the brunt of the adjustment to unfavorable price movements over the decade post-1995. Policy concerns include the exit of larger-scale specialized producers who tended to earn relatively high household incomes in 1995, barriers to the effective formation and operation of horizontal and vertical integration options to help mitigate market instability, the further development of insurance programs and markets for livestock producers, and development assistance to livestock households that for various reasons cannot increase scale and specialization.     

Supermarkets, wholesalers, and tomato growers in Guatemala

The article shows the asset‐related determinants and the impacts of the participation of small farmers in supermarkets versus traditional market channels in Guatemala. Compared to farmers selling only to the traditional market channels, farmers selling to supermarket channels are larger (but are in the upper tier of the “small farmer” category), have more capital, and are much more specialized in commercial horticulture in general and in tomatoes in particular. While they have higher yields, they also have higher input use, including use of chemicals. In fact, they severely overuse pesticides and fungicides. Moreover, these greater input expenditures mean that their profit rates are roughly similar to those of farmers in the traditional market channel. Supermarket‐channel farmers prefer the more demanding wholesale‐supermarket channel because it offers lower risks and lower transaction costs to market, a variety of quality grades of tomatoes, all year long. In turn, the supermarkets, who do not buy direct but rather source from a few specialized‐dedicated wholesalers, rely on this year‐round supply, lower transaction costs, and consistency of quality.     

Sustainable agricultural intensification in forest frontier areas

The Lore Lindu region in Indonesia—as in many forest frontier areas in Southeast Asia—has experienced rapid deforestation due to agricultural expansion in the uplands, at the forest margins. This has resulted in aggravated problems of erosion and water availability, threatening agricultural productivity growth. At the same time, technical progress is promoting agricultural intensification in the lowlands. In this article, we examine how improved technologies for paddy rice cultivation in the lowlands have affected agricultural expansion and deforestation in the uplands. The question of a “forest‐saving” or “forest‐clearing” effect related to technical innovation is important from a sustainable development perspective and remains a controversial issue in the literature. We address this question for the Lore Lindu region with an empirical model in which expansion in the lowlands and the uplands is estimated simultaneously. We use data from an extensive village survey conducted in the region, combined with GIS data. To guide the empirical analysis, we develop a theoretical framework based on a Chayanov‐type agricultural household model. The model analyzes farmers' land allocation decisions, taking into account the lowland–upland dichotomy in the agricultural sector. The empirical findings, corroborated by the analytically derived results, show how technical progress for lowland production affects land use at the forest margins and how these effects depend on the factor‐intensity of the technology. The findings imply specific rural development policies for sustainable agricultural intensification in forest frontier areas.     

Heterogeneity of commercialization gains in the rural economy

Farmers in low‐income rural economies often fail to switch to cash crops from staple production despite the positive income effects of commercialization expected by policy makers. The literature suggests that market failures prevent households from cash crop adoption but remains inconclusive regarding farmers' motives and the effects of commercialization. This article contributes to the debate by offering an original approach to the analysis of commercialization outcomes and farmers' decisions. It consists of applying a model with essential heterogeneity and a semiparametric estimation technique to analyzing harvest value returns to cash cropping. Using Malawian data, we show considerable heterogeneity in harvest value returns to cash cropping both within and between groups of farmers choosing different crop portfolios. Importantly, the results imply rational choices based on comparative advantage considerations of farming households: farmers self‐select into the activity where they expect higher gains and adopt cash crops when facing weaker market barriers.     

Agricultural diversification and integrated pest management in Bangladesh

We study factors associated with a shift toward diversified, high‐valued vegetable crops and the incentives associated with the use of IPM methods for vegetable producers in Bangladesh. The primary objective is to measure how IPM technologies affect the crop and technology choices of low‐income rice farmers. A three‐season household optimisation model is used to study crop and technology choice under price and yield uncertainty. The model is parameterised using data from vegetable farms and experimental IPM trials conducted in Bangladesh. Simulation results show that access to IPM technology and IPM availability combined with access to credit increase household welfare and lead to higher rates of vegetable adoption. Off‐farm employment opportunities work against vegetable cultivation and IPM use by risk‐averse farmers. Implications for policy and extension efforts are highlighted.     

Agricultural commercialization of Karen Hill tribes in northern Thailand

Based on a random sample of 240 farm households in Chiang Mai province, Thailand, this study shows that—contrary to widespread belief—Karen farm households are well-integrated into markets. Average levels of market integration are 31% for gross farm output, 35% for variable inputs, 49% for food consumption, and 80% for net family income. By estimating a two-stage least squares (2SLS) regression model, this study finds that integration into output markets is positively associated with a diversification of land use away from rice monoculture, more intense contact with nearby urban centers, and a greater number of roads connecting the village to the outside world. Controlling for these factors, the distance to urban centers does not impede market integration; distant villages are equally well integrated into output markets. The study further finds that integration into output markets improves farm productivity and net per capita income. Concerns about market integration are discussed. Results have implications for Thai policy makers who have recently placed increasing emphasis on the concept of "sufficiency economy" in order to promote the well-being of rural people.     

Horticulture exports, agro-industrialization, and farm–nonfarm linkages with the smallholder farm sector: evidence from Senegal

In this article we address the question of farm–nonfarm linkages at the household level in Senegal. We examine whether increasing off-farm employment opportunities for rural households—resulting from increased horticulture exports and associated agro-industrialization—has benefitted the smallholder farm sector through investment linkages. We use data from a household survey in the main horticulture export region in Senegal. We find that access to unskilled employment in the export agro-industry has contributed to the alleviation of farmers' liquidity constraints, resulting in increased smallholder agricultural production.