RURAL LIVELIHOOD DIVERSIFICATION

IN RICE-BASED AREAS OF
BANGLADESH
Presented By
Md Tanvir Ahmed
MS Research Scholar
Social Sciences Division
International Rice Research Institute

Presentation Outline
Background of the Study
Study Objectives
Conceptual Framework
Methodology
Results and Discussion
Take home messages

Background of the Study

It has been seen that, in rural Bangladesh, household income
is coming from various sources rather only from farming
But there is not enough empirical evidence that measured the
diversification of income sources in Bangladesh
Village Dynamics in South Asia (VDSA) project is collecting
income and employment data at rural household level.
Rural livelihood diversification can be defined as the process
by which rural households construct an increasingly diverse
portfolio of activities and assets in order to survive and to
improve their standard of living (Ellis, 2000).

Study Objectives
The general objective is to assess the livelihood diversification
in rural rice-based areas of Bangladesh. Specifically;
To identify the dominant patterns of rural livelihoods; and
To determine the factors affecting rural livelihood
diversification

Conceptual Framework

Research Methodology
Study Location

Divisions: 6
Districts: 11
Study Villages: 12
Region
Northern

Middle

South-Eastern

Western

Villages
Dharikamari
Rasun Shimulbari
Boikunthapur
Konapara
Nishaiganj
Patordia
Bhabanipur
Begumpur
Paschim Bahadurpur
Dakkhin Kabir Kathi
Khudiakhali
Khudiakhali

Sampling Design, Sample Size and Data Collection

Multi-stage random sampling technique

45 rural households were randomly chosen from each selected

village

Total 500 out of 540 households were included in the analysis as

some households data were incomplete

Primary data were collected for the year of 2012-13

through face-to-face interview using pre-tested semistructured questionnaire.

 Analytical Tools
Descriptive Analysis : Summary statistics, frequency tables,
percentage
Test of Significance : ANOVA test, t-test
Net Income from Crops:
NI = TR TC
where,
NI = Net income (profit) from the respective crop per
farm
TR = Total return per farm (included return from both
main product and by-products)
TC = Total cost pre farm

 Measuring of livelihood diversification

Simpson Diversification Index (SDI) was used to measure
the livelihood diversification. The formula is

where, n = Total number of income sources and

Pi = Income proportion of the i-th income source.
SDI values ranges from zero to 1. Households with highly
diversified incomes will have high SDI values, and lesser
diversified incomes will have lower SDI values.

 Based on the SDI values, the level of livelihood

diversification was defined as following:
LEVEL OF DIVERSIFICATION

SDI VALUES

No diversification

< 0.01

Low

0.01 - 0.25

Medium

0.26 - 0.50

High

0.51 - 0.75

Very high

> = 0.76

Based on the operating land holdings, households were

classified into four groups:
LAND CLASS

AMOUNT OF LAND

Functionally Landless

> = 0.2 ha

Small

0.21-0.80 ha

Medium

0.81-1.50 ha

Large

> =1.51 ha

 Definition of the explanatory variables used in the regression model

Tobit Regression
SDI* = 0 + 1 Gender + 2 Household size + 3 Farm size + 4 Member_org + 5
Migrants + 6 Dev_prog_part + 7 HH_assets + 8 Primary_Occupation + 9
Dependency_ratio + 10 Age_HH_Head + 11 Edu-HH_Head + 12
Amount_credit + 13 Amount_savings + 14 Distance_district_town + 15
Distance_market + 16 Region_D1 + 17 Region_D2 + 18 Region_D3 + 19
Land_D1 + 20 Land_D2 + 21 Land_D3+ i
if SDI* > 0
= 0 Otherwise

where,
SDI* = Livelihood diversification index
0 = Intercept
i = Error term, which is normally distributed with mean zero and

constant variance

RESULTS AND DISCUSSION

Socio-Economic and Demographic Characteristics of Respondent
Households

Household Income Sources and Their Share

Income from all the sources were categorised into
nine
groups.
1.
2.
3.
4.
5.
6.
7.
8.
9.

Rice crop
Non-rice crops
Non-crop Agriculture
Agricultural laborer
Non-agricultural laborer
Business and caste occupation
Salaried job and services
Remittance
Transfer Payment

Farm Income

Off-Farm
Income

Non-Farm
Income

Household Yearly Total Income from All

Sources and Their Share
Average yearly income and share by sources of income
AMOUNT OF INCOME
BDT/YEAR

USD/YEAR

SHARE OF
INCOME (%)

Rice Crop

30,415

380

16

Non-rice Crops

16,152

202

Non-crop agriculture

17,668

221

Agricultural laborer

4,864

61

Non-agricultural laborer

13,714

171

Business and caste occupation

38,992

487

20

Salaried job and services

12,427

155

Remittances

55,888

699

29

Transfer Payment

1,282

16

191,402

2,393

1
100

SOURCE OF INCOME

Total
F-value of ANOVA

14.27 (P = 0.000)

 Share (%) of different sources in total household income across four

regions

69.3%

67.6%

75.1%

72.3%

Farm, Off-farm and Non-farm Income

Farm and non-farm income and their share
SOURCE OF

AMOUNT OF INCOME

SHARE OF

INCOME

BDT/YEAR

USD/YEAR

INCOME (%)

Farm

64,235

803

33.6

Off-farm

4,864

61

2.5

Non-farm

122,303

1,529

63.9

Total

191,402

2,393

100.0

Share of farm, off-farm and non-farm income

Farm income; 34%

Non-farm income; 64%

Off-farm income; 3%

Household Livelihood Diversification

Distribution of households across the level of diversification

LEVEL OF DIVERSIFICATION

NUMBER OF
HOUSEHOLD

PERCENTAGE (%)

No

30

6.0

Low

98

19.6

Medium

159

31.8

High

192

38.4

Very high

21

4.2

 Average SDI values by region

REGION

NO. OF HOUSEHOLD

AVERAGE VALUE OF SDI

Northern
Middle
South-Eastern
Western
All

125
128
166
81
500

0.45
0.37
0.46
0.39
0.42

Distribution (%) of households into different level of diversification by

regions
LEVEL OF DIVERSIFICATION
REGION

No (%)

Low (%)

Medium
(%)

High
(%)

Very high
(%)

Northern

2.4

12.8

43.2

38.4

3.2

Middle

10.9

24.2

28.9

32.8

3.1

South-Eastern

6.6

16.3

25.9

43.4

7.8

Western

2.5

29.6

30.9

37.0

0.0

All

19.6

31.8

38.4

4.2

Most of the households from all four regions have diversified their
livelihoods in to medium and high level.

Total
100.0
100.0
100.0
100.0
100.0

 Distribution of household (%) at different level of livelihood diversification by

region

 Average SDI values by household land class

LAND CLASS
Functionally landless

AVERAGE VALUE OF SDI

0.34

Small

0.46

Medium

0.47

Large

0.40

Distribution (%) of households into different level of diversification by household

land class
LEVEL OF DIVERSIFICATION

LAND CLASS

No
(%)

Low
(%)

Medium
(%)

High
(%)

Very high
(%)

TOTAL

Functionally Landless

7.1

31.2

34.8

24.1

2.8

100.0

Small
Medium
Large
All

5.6
6.1
4.3
6.0

16.7
11.2
15.2
19.6

25.1
31.6
54.3
31.8

46.5
45.9
26.1
38.2

6.0
5.1
0.0
4.4

100.0
100.0
100.0
100.0

highest percentage of small (47%) and medium (46%) land holding households
had high level of livelihood diversification

 Distribution of household (%) at different level of livelihood diversification by

household land class

Factors Affecting Livelihood Diversification

Correlation analysis among the explanatory

variables

. corr gender_hh_head family_size farm_size member_org migrants dev_prog_parti primaryoccupation hh_assets dependency_ratio age_hh_head land_manratio edu
> _head borrowing savings distance_nearmarket distant_district_town region_d1 region_d2 region_d3 land_d1 land_d2 land_d3
(obs=500)
gender~d family~e farm_s~e member~g migrants dev_pr~i primar~n hh_ass~s depend~o age_hh~d land_m~o edu_head borrow~g
gender_hh_~d
family_size
farm_size
member_org
migrants
dev_prog_p~i
primaryocc~n
hh_assets
dependency~o
age_hh_head
land_manra~o
edu_head
borrowing
savings
distance_n~t
distant_di~n
region_d1
region_d2
region_d3
land_d1
land_d2
land_d3

distant_di~n
region_d1
region_d2
region_d3
land_d1
land_d2
land_d3

1.0000
0.0455
0.2378
0.0401
-0.1710
0.0496
0.3433
-0.0551
-0.0333
0.1853
0.2284
0.0917
0.0052
-0.1413
0.1253
-0.0224
0.0976
-0.0394
-0.1128
-0.1644
0.0207
0.1065

1.0000
0.3223
-0.0730
0.6392
0.0860
0.1561
0.3625
0.1277
0.2740
-0.0309
0.0376
0.2040
0.1837
-0.0569
0.1444
-0.1707
-0.0709
0.3137
-0.2621
-0.0156
0.1279

1.0000
-0.1237
0.0659
0.0124
0.4005
0.2342
-0.0375
0.0998
0.8470
0.0792
0.1968
0.0470
0.1814
-0.0893
0.1229
-0.1059
0.0022
-0.4479
-0.1745
0.3322

1.0000
-0.1248
0.2103
-0.1922
-0.0516
-0.0230
-0.1231
-0.1049
-0.0477
0.0903
-0.0233
0.0298
-0.2315
0.1284
-0.1717
-0.1436
0.1792
-0.0293
-0.0993

1.0000
-0.0875
0.0290
0.3117
-0.0299
0.2792
-0.1073
0.0231
0.2445
0.2212
-0.0990
0.1547
-0.1824
-0.0482
0.3488
-0.1489
0.0221
0.0356

1.0000
-0.0785
-0.0591
0.2138
-0.0728
-0.0193
-0.0549
-0.0007
-0.0272
0.1822
-0.0054
0.1582
-0.1012
0.0477
0.1000
-0.0479
-0.0572

1.0000
0.0198
-0.0754
0.1336
0.4112
-0.0507
-0.0723
-0.0472
-0.0389
-0.0377
-0.0047
-0.0906
0.1143
-0.3892
0.0385
0.3250

distan~n region~1 region~2 region~3

land_d1

land_d2

land_d3

1.0000
-0.5443
-0.3094

1.0000
-0.4288

1.0000

1.0000
-0.6079
0.5850
0.2813
-0.1086
0.1806
-0.1195

1.0000
-0.3387
-0.4070
0.0488
-0.1003
0.0524

1.0000
-0.4135
-0.0112
0.0552
-0.0472

1.0000
-0.1115
0.1511
-0.0699

1.0000
-0.0331
0.1076
0.1267
0.2197
0.3380
0.2386
-0.0863
-0.0998
-0.0838
-0.1318
0.1158
-0.2106
-0.1206
0.1721

1.0000
-0.0548
-0.0766
0.0096
0.0230
-0.0044
0.0269
0.1357
-0.0846
0.0342
0.1037
0.0385
-0.0105
-0.0466

1.0000
0.0165
-0.1863
0.0162
0.1286
-0.0386
0.0290
-0.0409
0.0023
0.1267
-0.2072
0.0623
0.0375

1.0000
0.0839
0.0878
-0.0238
0.2350
-0.1496
0.2098
-0.0988
-0.0988
-0.4634
-0.1176
0.3777

1.0000
0.1231
-0.0689
0.0696
0.0035
0.0239
-0.1234
0.0241
-0.1290
0.0261
0.0335

1.0000
0.1957
-0.0377
-0.0369
-0.0347
-0.1053
0.1466
-0.0394
-0.0204
-0.0599

savings distan~t

1.0000
-0.0852
-0.0681
-0.0938
-0.0603
0.1930
-0.0881
0.0079
-0.0694

1.0000
0.1710
0.3182
0.0606
-0.2546
-0.0470
-0.0780
-0.0104

 Variance Inflation Factor (VIF) analysis

. vif
Variable

VIF

1/VIF

land_d1
land_d2
distant_di~n
region_d2
region_d3
land_d3
farm_size
region_d1
family_size
migrants
distance_n~t
primaryocc~n
hh_assets
gender_hh_~d
age_hh_head
borrowing
savings
member_org
dev_prog_p~i
edu_head
dependency~o

6.90
6.12
5.49
5.00
4.51
3.35
2.60
2.55
2.33
2.20
1.92
1.61
1.58
1.41
1.34
1.31
1.28
1.28
1.25
1.24
1.13

0.144865
0.163325
0.182091
0.199849
0.221857
0.298261
0.384476
0.392273
0.429738
0.454858
0.521119
0.621083
0.634177
0.708978
0.747017
0.760789
0.779260
0.782590
0.799907
0.803482
0.884820

Mean VIF

2.69

 Test of Heteroscedasticity
Auxiliary regression
. reg error2 sdihat
Source

SS

df

MS

Model
Residual

.023637993
.985676826

1 .023637993
498 .001979271

Total

1.00931482

499 .002022675

error2

Coef.

sdihat
_cons

-.05363
.0606118

Std. Err.
.0155187
.006859

t
-3.46
8.84

Number of obs
F( 1, 498)
Prob > F
R-squared
Adj R-squared
Root MSE

P>|t|
0.001
0.000

=
=
=
=
=
=

[95% Conf. Interval]

-.0841201
.0471356

-.0231398
.0740881

. hettest

Breusch-Pegan / Cook- Weisberg test (hettest test)

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity
Ho: Constant variance
Variables: fitted values of sdi
chi2(1)
Prob > chi2

=
=

8.22
0.0042

500
11.94
0.0006
0.0234
0.0215
.04449

 Tobit (Multiplicative Heteroscedasticity) regression results

Marginal effect

Take Home Messages

Rural households in Bangladesh are diversifying their
livelihoods mostly at medium level
South-Eastern region has highest livelihood diversification
while Middle region has the lowest.
Small and Medium land holding households have higher
level of livelihood diversification than Landless and large
land holding households.
Non-farm income contributes more in total household
income, hence it should be encouraged to expand nonfarm employment opportunities.
Functionally landless households should be given more
attention to increase and diversify their incomes.

Maraming salamat po!