Rural employment and income diversification in Pakistan

Abstract

Rural households have different asset endowments and they either specialize in single activity or choose to earn both from farm and nonfarm activities. The study constructs Hirchman-Herfindahl Index to evaluate the household income diversification by employing survey data for rural household from Pakistan for the periods 2001-02 and 2010-11. The study estimated the determinants of household diversification by employing logit, linear and censored regression models. Our results showed that agricultural assets including landholding and livestock ownership negatively affect the income diversification. On the other hand, human capital development through education and female participation increased the household employment diversification. The households having access to transport and formal credit choose to diversify while the impact of access to road and information was found insignificant. The results also suggests the development of nonfarm sector by investing in commuting infrastructure and human capital to ensure sustainable incomes of rural households.