Livelihood literature (Hussein and Nelson 1999; Ellis 2000) suggests that though exogenous trends and shocks play an important role in pushing rural people towards a diversified livelihood strategy, diversification choices are also firmly rooted in the micro-economic logic of farming households. Different elements should be considered in this connection.
Availability of key-assets (such as savings, land, labor, education and/or access to market or employment opportunities, access to common property natural resources and other public goods) is a an evident requisite in making rural households and individuals more or less capable to diversify (e.g. Dercon and Krishan 1996; Abdulai and Crole Rees 2001). Investment of a proper mix of the above endowments is the starting move of any independent activity. Moreover, labor capability and education determine the capability of finding a job and savings are often needed to migrate. Yet diversification may also develop as a coping response to the loss of capital assets needed for undertaking conventional on-farm production. Decreased availability of arable land, increased producer/consumer ratio, credit delinquency, environmental deterioration can be indeed important drives towards diversification. Economic and political shocks are often a major reason for migrate.
Maximization of return per unit of labor (Ellis 1993, 2000) is another important element in livelihood diversification choices. This principle foresees that, in any given point in time, a rural household will choose the most cost-effective opportunity to ensure maintenance of its consumption level. This formulation can be elaborated in different ways. For instance, availability of a surplus of household labor (or a high producer/consumer ratio) may influence the household decision to engage in wage labor. Similarly, food availability and food cost volatility on the local market can affect the relative importance attributed to self-consumption production, and promote or prevent the undertaking of wage labor or engagement in income generating enterprises. Seasonality may also lead to a cyclical shift in time allocation from on-farm to off-farm sources of revenue.
Risk management is a further factor often invoked to explain diversification behavior (Chambers 1997, Reardon 1992, Bryceson 1996; Ellis 2000; Hussein and Nelson 1999). The basic logic of this argument is that previous experience of crop or market failure can provoke diversification as a means of spreading perceived risk and reducing the impact of total or partial failure on household consumption. The argument entails that diversification often requires choosing the second best income-generating alternative: risk-averse farmers perceive the amount of income given up by diversifying income sources as less important than the reduction of the total failure hazard. In this perspective, risk management through diversification complements and counterbalances the above principle of maximization of return per unit of labor.
Strengthening the household asset basis can be an additional important factor in diversification choices. In particular, members of better-off household can undertake innovative activities or engage in highly remunerative wage labor (i.e. migrate abroad) with the specific aim of accumulating savings needed to expand the land holding, offer education opportunities to the young generation, or insure themselves against illness and aging. In addition to that, diversification may also occur as a means to consolidate household natural capital (i.e. to enhance the environmental sustainability of a particular livelihood strategy).
Site-specific opportunities such as local market contingencies, development projects, infrastructure development (e.g. a new road), personal contacts might play an important role in pulling rural household towards livelihood diversification. Examples may include the opening of a market niche for non conventional agricultural commodities, the establishment of tourist resorts, a relative or friend acting as a liaison between the household and an employer in town or abroad, or the development of a cooperative enterprise in the community. These hypothetical examples suggest that the interplay among market dynamics, social capital assets and enabling interventions often play a major role in generating opportunities for livelihood diversification.
Individual and household identity and vision of the future might also shape diversification decisions. For instance, new on-farm activities can be preferred to migratory wage labor as livelihood diversification strategies, because they are perceived more consistent with maintaining a rural life style. On the opposite “city lights” attraction can be an important factor in pushing youngsters to contribute to household diversification by migrating in town or abroad.
Gender relationships are also important in shaping diversification process. Social organization and culture can significantly influence the relative access of diverse gender (and age groups) to household’s capital assets (e.g. Ellis 2000; Gladwin and others 2001; Dolan 2002) or constraint/promote their mobility. This might result in a different degree of involvement in diversification activities and/or in an unequal distribution of their benefits between genders (Warren 2001). In some cultures, migratory wage labor or off-farm enterprises are basically men business, that result in transferring to women the whole responsibility for conventional subsistence and cash cropping (the so called “feminization of agriculture”). However, in other cultures, women are often able to play an autonomous role in livelihoods diversification by undertaking on their own small-scale enterprises or migrating to town or abroad. Intermediate situations also exist where women’s engagement in market oriented activities is possible only as far it entails a limited investment of household assets and it does not seriously threaten the established sexual division of labor. Participation in innovative enterprises is often advocated as an important means to promote rural women empowerment and more equitable gender relationships within the household.
All together, the above considerations suggest that rural livelihoods should be addressed as a complex adaptive process aimed at ensuring an optimal trade-off between satisfying immediate consumption needs, ensuring resilience against shocks and negative trends (e.g. Haugh 2000) and meeting values and expectations. Research has shown that diversifying households often pursue this threefold objective through a continued re-shuffling of their livelihood portfolio according to contingent constraints and opportunities (e.g. Bigsten and Kayzzi-Mugerwa 1995).
