Agricultural Economics and Extension Project Topics

Analysis of Livelihood Diversification by Farming Households

Analysis of Livelihood Diversification by Farming Households

Analysis of Livelihood Diversification by Farming Households

Chapter One

Objectives of the Study

The purpose of this study was to analysis of livelihood diversification by farming households.

The specific objectives were:

  1. To characterize the livelihood diversification activities in Kaduna state, Nigeria.
  2. To evaluate the livelihood diversification by farming households in Kaduna state, Nigeria.



Understanding Livelihood Diversification 

The term “livelihood” refers to a way of living to sustain one’s life and provide basic needs (Khatun & Roy, 2012). Diversified livelihood occurs when household members have a portfolio of activities and communal proficiencies to exist and to develop their well-being (Ellis, 1998). Hussein and Nelson (1999) defined livelihood diversification as attempts by individuals to raise income and lessen environmental threats.

This study adopts the definition by Iiyama (2006) that livelihood diversification is grouping of on-farm, off-farm and non-farm activities to earn a living. This definition was followed because it described the specific types of activities households can diversify to. Households that adapt diversified livelihoods can cope with shocks, use the natural resources sustainably and also provide opportunities for future generations (Schwarze & Zeller, 2005).

The motivation for households to diversify their livelihoods is attributable to pull and push factors (Shen, 2004: Davis, 2006). The pull factors include the reasons behind households desiring to accumulate capital (Shen, 2004). These factors include income, education level and market access. They enable households to seize opportunities that they did not have access to. Push factors, on the other hand, are driven by circumstances or necessities (Davis, 2006). The factors consist of poverty, rural areas, unemployment, unpredictable weather, household size and fluctuating food prices. Push factors result in households adopting to cheap labour because there would be more labour than needed, thus households would be driven by pressure and not the desire diversify.

Theories Underpinning Household Choice of Livelihood Diversification Activities

Several theories underpin the concept of household choice of livelihood diversification activities. These include the Agricultural Household Model (AHM), Boserupian model and random utility model (RUM). These theories include the elements of the choice process which are; households first determines the available alternatives, it then assesses the attributes of each choice, and finally uses a decision rule of maximizing utility to select a livelihood activity from the available activities (Ben-Akiva & Lerman, 1985). Some households may first-rate a specific activity minus go0ing through the process but by peer review/ choice and sometimes out of habit (Koppelman & Bhat, 2006).




Conceptual framework

Figure 3.1 shows how the household choice of livelihood diversification is linked from the resources they are endowed with to the varying outcomes possible from the resources.

Figure 3. 1 Rural Livelihood Framework

Source: Scoones (1998)

The framework can be applied at a range of different scales, individual, household, household cluster, extended kin grouping, village, region or even nation, with sustainable livelihood outcomes assessed at different levels (Scoones, 1998). The household diversification of livelihoods has four livelihood resources human capital, natural capital, financial capital and social capital as depicted in Figure 3.1. The framework shows how people operate within a vulnerability context and trends that is shaped by different factors, macro-economic conditions, climate, trade terms and demography (Scoones, 1998). With this conditions they still draw on different types of livelihood resources them develop a range of livelihood activities while influenced by institutions and organizational structures to achieve desired livelihood outcomes. The livelihood outcomes continue to influence the livelihood resources that households are embedded with. Livelihood outcomes include benefits of being involved in one of the diversification activities was expected to be increased income, food security in the area and improvement of well-being.



Diagnostic tests

The HM test showed that there was no violation of the IIA. This means that the difference between the coefficients were negligible, this was also shown by insignificant probabilities for each livelihood activities as compared to the full model. The chi-square (χ2) which are not significant and prob> χ2 for crop farming, livestock farming and TBA, crop and livestock farming were having χ2 0.21 and prob > χ2 of 1.000, χ2 1.95 and prob > χ2 of 0.9995 and χ2 20.09 and prob> χ2 of 0.6918 respectively (see Appendix V).

The results from the test done on stata have shown that the variables are not highly correlated to each other, they had Pearson’s correlations not close to ±1 and the p-values showed significance at 0.05 and 0.01 levels (see Appendix II). The mean VIF for this study was 1.17 and for each explanatory variable, the VIF ranged between 1.05 and 1.60 (see Appendix II). The VIF was less than 5 for all the explanatory variables, there was insignificant linear relationship among the variables therefore justifying their inclusion in MNL.

The Breusch-Pagan test for this study was insignificant with prob> χ2 of 0.372. This indicates that there is no heteroskedasticity in the model ran (see Appendix II). The pseudo R2 showed a goodness-of-fit of 0.2017, this showed that the predictors were good for the model.




Diversification has been defined in various ways. As for this study, the profound distinction is that diversification must consider both internal and external diversification. Households are involved in diversified activities in crop farming, livestock farming, crop and livestock farming and TBA, crop and livestock farming. The activities have shown that households in Kaduna state are involved in on-farm and on-farm and non-farm activities. Majority of the households had diversified to crop and livestock farming activity. However, crop and livestock farming was the least beneficial as shown by the gross margins. The major constraints to diversification that apply to all households are markets and lack of skills. The study characterized livelihood diversification activities by demographic characteristics, farm level characteristics and economic characteristics.

The descriptive statistics revealed that majority of household heads were females and crop and livestock farming livelihood had the highest number of both females and males households heads. The results also showed that, on average the youngest household head is in their early fifties and were involved in TBA, crop and livestock farming, while on average the oldest household head were in their late seventies and were mostly involved in crop farming. Households received income from a diverse employment activities which include, farming, government, private sector and self-employment. The results indicate that farming is the main source of income for many households in this area.

Furthermore, the study has shown the determinants of household livelihood diversification activities that can be modified to allure the households in Kaduna state to venture into diversified livelihoods. The variables that significantly determine which diversification activity households may venture into were gender, age, asset category, distance to market, land ownership, farm size and extension services. Gender and extension services were significant for diversifying to crop and livestock farming and TBA, crop and livestock farming. Distance to market was significant to crop farming and TBA, crop and livestock farming. Land ownership and farm size was only significantly relevant for crop and livestock farming. Lastly, age and asset category were relevant for diversifying to TBA, crop and livestock farming livelihood diversification activity only.


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