Table of Contents

[Link].........................................................................................................................2

2. Objectives of the Review.....................................................................................................2

3. Discussion............................................................................................................................3

3.1 The Concept of Rural Livelihood Diversification...................................................................3

3.2 Factors Driving Livelihood Diversification.............................................................................4
3.2.1 Economic Factors.......................................................................................................... 4
3.2.2 Environmental Factors.................................................................................................. 4
3.2.3 Institutional Factors...................................................................................................... 5
3.2.4 Social and Demographic Factors...................................................................................5
3.3 Effects of Diversification.......................................................................................................5
3.4 Household Strategies for Diversification..............................................................................6
3.3.1 Agricultural Intensification and Extensification.............................................................6
3.3.2 Non-Farm Economic Activities......................................................................................6
3.3.3 Migration and Remittances...........................................................................................7
3.4 Implications for Rural Development.....................................................................................7
4. Conclusion...........................................................................................................................8

5. critiques...............................................................................................................................8

6. The Way Forward (Recommendations)................................................................................8

7. References...........................................................................................................................9
A Review of Household Strategies and
Rural Livelihood Diversification by Frank
Ellis (1998)

[Link]
Rural livelihoods are dynamic and influenced by various economic, social, and environmental
factors. In many developing countries, rural households do not rely solely on agriculture for their
survival. Instead, they engage in multiple income-generating activities, a process known as
livelihood diversification. This diversification is not only a survival strategy but also a means to
enhance household income, reduce vulnerability to external shocks, and improve overall well-
being.

Frank Ellis, in his 1998 paper Household Strategies and Rural Livelihood Diversification,
explores the complexities of rural livelihood diversification and the strategies households adopt
to sustain themselves. He argues that rural people are not passive victims of poverty but active
agents who make strategic decisions to manage risks and take advantage of emerging
opportunities. The study highlights the shift from traditional, agriculture-based livelihoods to
mixed-income sources, including non-farm employment, small businesses, and remittances.

The increasing trend of livelihood diversification is driven by multiple factors, such as declining
farm productivity, limited access to markets, unpredictable climatic conditions, and changing
policy environments. Ellis examines how these factors push and pull rural households toward
more diverse economic activities. He also discusses the implications of diversification for rural
development, emphasizing the role of policies in either supporting or hindering this process.

The purpose of this review is to critically analyze Ellis’ key arguments, assess the factors
influencing rural livelihood diversification, and explore its implications for economic
development and poverty reduction. Understanding these aspects is essential for designing
policies that promote sustainable rural livelihoods and enhance economic resilience. This review
will also discuss recommendations on how to support livelihood diversification through policy
interventions, infrastructure development, and skill enhancement programs.

2. Objectives of the Review

1. To analyze the factors influencing rural livelihood diversification.

2. To evaluate different strategies employed by rural households to sustain their livelihoods.

3. To examine the implications of livelihood diversification on rural development and

poverty reduction.

3. Discussion

3.1 The Concept of Rural Livelihood Diversification

Frank Ellis defines livelihood diversification as the process by which rural households engage in
multiple economic activities to improve income stability and reduce vulnerability. This
diversification is a response to economic uncertainties, environmental challenges, and social
transformations. Unlike subsistence farming, which relies solely on agricultural production,
diversified livelihoods incorporate a mix of farm and non-farm activities to maximize income
sources and enhance resilience.

Types of Livelihood Diversification:

1. Agriculture-Based Diversification: Households engage in strategies that improve

agricultural productivity and income. This includes the adoption of modern farming
techniques, high-yield crop varieties, agroforestry, and livestock rearing. Cash crops such
as coffee, cotton, and tea offer rural households higher returns compared to subsistence
farming.

2. Non-Farm Employment: Many rural households diversify their income by engaging in

wage labor, trading, small businesses, and rural industries. This includes employment in
factories, construction work, and informal sector activities such as street vending and
transportation services.
 3. Migration and Remittances: Households send family members to urban areas or abroad
to seek employment. The money sent back (remittances) provides financial stability,
funds household expenses, and serves as capital for business investment.

Categories of Livelihood Diversification:

 Necessity-Driven Diversification: This occurs when households diversify their income

due to economic constraints such as poverty, land scarcity, or lack of employment
opportunities. For many poor rural households, diversification becomes a survival
strategy rather than a choice.

 Opportunity-Driven Diversification: This happens when households seek to improve

their economic standing by exploiting new opportunities, such as emerging markets,
improved infrastructure, and government support programs.

3.2 Factors Driving Livelihood Diversification

Ellis categorizes the primary drivers of rural livelihood diversification into four broad areas:

3.2.1 Economic Factors

Income Instability: Agricultural incomes are highly unstable due to factors like seasonal
variations, market price fluctuations, and unpredictable climate conditions.
Diversification into non-farm activities provides a buffer against income volatility.

Market Access: Households close to urban centers or transportation hubs are better
positioned to participate in trade and wage employment. Access to roads, communication
networks, and financial institutions enhances economic diversification opportunities.

Availability of Credit: Financial institutions, microfinance services, and informal

lending groups help rural households invest in small businesses, acquire improved
agricultural inputs, and develop skills for alternative employment.

Employment Opportunities: The availability of wage employment in rural or nearby

urban areas significantly influences diversification choices.
3.2.2 Environmental Factors
1. Climate Change: Increasing incidences of droughts, floods, and erratic weather patterns
make sole reliance on agriculture risky. Households often turn to non-farm activities to
mitigate these risks.

2. Land Degradation: Soil erosion, deforestation, and declining soil fertility reduce
agricultural productivity. As a result, rural households seek alternative income sources to
compensate for declining farm yields.

3.2.3 Institutional Factors

1. Government Policies: Policies related to land tenure, taxation, subsidies, and rural
investment influence livelihood diversification. Secure land tenure allows farmers to
invest in their land, while supportive policies encourage non-farm enterprises.

2. Infrastructure Development: Availability of electricity, transportation, water supply,

and internet connectivity plays a crucial role in fostering small businesses, cottage
industries, and rural employment opportunities.

3.2.4 Social and Demographic Factors

1. Education and Skills: Households with better-educated members have greater access to
skilled employment and entrepreneurial activities. Education empowers individuals to
seek formal employment and engage in high-value businesses.

2. Household Labor Availability: The number of working-age family members affects the
household’s ability to engage in multiple income-generating activities. Larger families
often have greater diversification potential.

3. Migration and Remittances: Rural families with members working in cities or abroad
benefit from additional financial resources, which they invest in businesses, education,
and improved living conditions.
3.3 Effects of Diversification

Ellis discusses the varied impacts of diversification on rural households:

 Poverty and Income Distribution: Diversification can help reduce poverty by providing
additional income sources, particularly for the poor who lack assets. However, it can also
exacerbate inequality, as wealthier households often have better access to lucrative non-
farm opportunities.
 Agricultural Productivity: Diversification can have mixed effects on agriculture. While
some studies suggest that non-farm income can support farm investments, others argue
that it may divert labor and resources away from agriculture, leading to stagnation.
 Gender Dynamics: Diversification often has gendered implications. In many cases, men
migrate for work, leaving women to manage farms. This "feminization of agriculture"
can increase women’s workloads but may also enhance their decision-making power
within households.

3.4 Household Strategies for Diversification

Ellis identifies three major strategies that rural households employ to diversify their income
sources:

3.3.1 Agricultural Intensification and Extensification

 Intensification: This strategy involves increasing agricultural output per unit of land
through the use of fertilizers, irrigation systems, improved seeds, mechanization, and
sustainable farming practices.

 Extensification: Households expand their cultivated land, but this strategy is often
constrained by land availability and environmental limitations such as deforestation and
soil degradation.
3.3.2 Non-Farm Economic Activities
 Wage Employment: Many rural workers seek employment in construction, factories,
transportation, and service industries. Wage labor provides a stable source of income
compared to subsistence farming.

 Rural Enterprises: Households start small businesses such as retail shops, restaurants,
carpentry, and auto repair services. These businesses contribute to the local economy and
reduce dependency on agriculture.

 Handicrafts and Cottage Industries: Traditional crafts such as weaving, pottery,

leatherwork, and tailoring provide additional income and preserve cultural heritage.
Women often engage in these activities as a means of economic empowerment.

3.3.3 Migration and Remittances

 Seasonal and Permanent Migration: Rural workers move to urban areas or abroad in
search of better job opportunities. Seasonal migration allows individuals to work in cities
during off-peak agricultural periods.

 Remittances: Migrants send money home, which helps families improve their quality of
life, finance education, healthcare, and invest in entrepreneurial activities.

3.4 Implications for Rural Development

Ellis’ study on livelihood diversification highlights several implications for rural economies and
development policies:

1. Economic Resilience: Diversification enhances household resilience against economic

shocks, reducing poverty and vulnerability.

2. Poverty Reduction: Non-farm income sources play a crucial role in improving the
economic well-being of rural households by supplementing agricultural earnings.

3. Wealth Disparities: While diversification benefits many households, wealthier families

with better resources and social capital gain more, leading to increased inequality.
 4. Policy Support: Effective policies are needed to ensure that all rural households,
particularly the poorest, have access to diversification opportunities. This includes
investment in education, infrastructure, and microfinance services.

5. Sustainable Development: Encouraging environmentally sustainable non-farm

activities, such as eco-tourism, sustainable crafts, and renewable energy businesses,
ensures long-term rural prosperity without degrading natural resources.

4. Conclusion
Ellis’ research provides valuable insights into the role of livelihood diversification in rural
economies. The study emphasizes that rural households actively seek ways to improve their well-
being through diverse income strategies. However, diversification is not equally accessible to all
households—those with better education, skills, and resources tend to benefit more. The study
underscores the need for inclusive policies that enable all rural households to participate in and
benefit from diversification.

5. critiques
 Strengths:

 Comprehensive Analysis: The paper integrates economic, social, and institutional

factors, offering a well-rounded perspective on livelihood diversification.

 Interdisciplinary Approach: Combines theory with empirical insights, making it relevant

to policymakers, researchers, and development practitioners.

 Focus on Non-Farm Income: Highlights the importance of non-farm income and informal
employment in rural livelihoods.

 Policy Relevance: Provides guidance on poverty alleviation and rural economic

resilience, emphasizing diversification as a risk-management strategy.

 Weaknesses:

 Lack of Case Studies: The absence of concrete examples or primary data reduces the
practical applicability of the study.

 Generalized Assumptions: Assumes that households diversify rationally, overlooking

structural constraints like capital, education, and social networks.
  Limited Exploration of Power Dynamics: Fails to delve into how social factors such as
class, gender, and land ownership affect diversification opportunities.

6. The Way Forward (Recommendations)

To support rural livelihood diversification, policymakers should consider the following:

Enhance rural infrastructure: Better roads, electricity, and communication networks

improve market access and business opportunities.

Increase financial support: Expanding access to microfinance and rural banking

services can help households invest in alternative income sources.

Improve education and skills training: Rural youth should have access to vocational
training programs to participate in non-farm employment.

Develop supportive policies: Governments should create favorable policies for small
businesses, trade, and wage employment in rural areas.

Promote climate adaptation strategies: Encouraging sustainable farming and non-

agricultural activities can help rural households cope with climate change.

7. References
Ellis, F. (1998). Household Strategies and Rural Livelihood Diversification. The Journal of
Development Studies, 35(1), 1-38. DOI: 10.1080/00220389808422553.
Reardon, T., Delgado, C., & Matlon, P. (1992). Determinants and Effects of Income
Diversification Amongst Farm Households in Burkina Faso. The Journal of Development
Studies, 28(2).

Bryceson, D.F. (1996). Deagrarianization and Rural Employment in Sub-Saharan Africa: A

Sectoral Perspective. World Development, 24(1), 97-111.

Haggblade, S., Hazell, P., & Brown, J. (1989). Farm-Non-farm Linkages in Rural Sub-Saharan
Africa. World Development, 17(8), 1173-1201.