Income diversification strategies among rural households in developing countries

Purpose – The purpose of this paper is to examine the income strategies adopted by rural households in Ghana and analyzes the determinants of households’ choice of income portfolio. Design/methodology/approach – A multinomial logit approach is employed by the paper to investigate the determinants of various income strategies adopted by households in rural Ghana. Findings – Results indicate that household characteristics, location and infrastructure all play a role in explaining the adoption of income strategies other than a purely on-farm strategy by households. Education is a key determinant of income strategies involving non-farm wage employment, while access to credit and electricity play important roles in non-farm self-employment income strategies. Practical implications – The findings of the paper call for a promotion of off-farm income opportunities to complement farm incomes and to enhance access of rural households to these sources of income. Originality/value – The paper models rural household income portfolios into mutually exclusive categories which enables the application of the multinomial logit approach. The paper deviates from mainstream rural income diversification literature that has focussed on assessing the determinants of income shares.