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Boda-bodas rule: Non-agricultural activities and their inequality implications in Western Kenya

Jann Lay (), George Michuki M'Mukaria and Toman Omar Mahmoud
Authors registered in the RePEc Author Service: Toman Barsbai

No 20, Proceedings of the German Development Economics Conference, Göttingen 2007 from Verein für Socialpolitik, Research Committee Development Economics

Abstract: Diversification into non-agricultural activities in rural areas can be broadly classified as either survival-led or opportunity-led. The existence of these two types of non-agricultural activities implies a U-shaped relationship between the share of income derived from non-agricultural activities and household wealth as well as total household income. Survival-led engagement in non-agricultural activities would be inequality-decreasing through increasing the incomes of the poorer parts of the population and would reduce poverty. Opportunity-led diversification, by contrast, would increase inequality and have a minor effect on poverty, as it tends to be confined to non-poor households. Using data from a household survey conducted by ourselves in Western Kenya, we find the overall share of non-agricultural income in this very poor region to be important, but below the sub-Saharan African average. Multivariate analyses confirm the existence of both survival-led and opportunity-led diversification. Yet, the poverty and inequality implications of the differently motivated diversification strategies differ somewhat from our expectations. As expected, we find high-return activities to be confined to richer households, while both rich and poor households are engaged in low-return activities. Very poor households even appear to be excluded from the latter. Simple simulation exercises illustrate the inequality-increasing and very limited poverty effects of increases in high-return income, whereas increased low-return income shows substantial poverty reduction leverage. Our findings indicate that rural households do not only face asset constraints, but also very limited or relatively risky high-return opportunities outside agriculture.

Keywords: Non-agricultural activities; Inequality; Income diversification (search for similar items in EconPapers)
JEL-codes: I31 O17 Q12 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-afr, nep-agr, nep-cmp and nep-dev
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Working Paper: Boda-bodas Rule: Non-agricultural Activities and Their Inequality Implications in Western Kenya (2007) Downloads
Working Paper: Boda-bodas rule: Non-agricultural activities and their inequality implications in Western Kenya (2007) Downloads
Working Paper: Boda bodas rule: Non-agricultural activities and their inequality implications in Western Kenya (2007) Downloads
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