Income Diversification Factors Among Rural Households: The Case of Bangladesh

Abstract

Income diversification among rural households over farm and off-farm activities started attracting considerable attention in the last decade. In this study, the factors affecting household agriculture and income diversification in Bangladesh are examined. OLS regressions were used to test whether or not household behavior supports portfolio theory and risk reduction. Contrary to expectations, income diversification was more practiced among richer households. The result suggests that wealth endowment is important for off-farm activities. Agricultural diversification was not practiced as a risk reduction strategy. The number of dependents is a "push" factor for off-farm activities. Education has some positive effect on income level; promotion of education may enhance income. Market access also was key to engaging in off-farm activities. More research into the dynamics of off-farm activities, the impacts of off-farm activities on income distribution, and types of education that influence incomes are suggested to formulate further poverty alleviation strategies and programs.