Abstract

https://ssrn.com/abstract=1688433
 


 



Is Household Income Diversification a Means of Survival or a Means of Accumulation? Panel Data Evidence from Tanzania


Ralitza D. Dimova


Brunel University London - Economics and Finance; IZA Institute of Labor Economics

Kunal Sen


University of Manchester

April 6, 2010


Abstract:     
What drives income diversification among rural households in developing countries? A large literature has examined whether household income diversification is a means of survival or a means of accumulation, which has so far remained inconclusive. This paper attempts to evaluate which explanation of household income diversification – diversification as survival or diversification as accumulation – stands up to empirical scrutiny. We use household panel data from Tanzania of approximately 800 households for four years and use fixed and random effects models to sweep out unobserved households’ attitudes to risk that may be correlated with household income diversification behaviour. We also use instrumental variable methods to address the possibility of reverse causality and that the household’s income status may be endogenous to its diversification behaviour. Our results suggest that the ‘diversification as accumulation’ motive of household income diversification seems to have stronger empirical validity in the Tanzanian context.

Keywords: Income Diversification, Tanzania, Panel Data


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Date posted: October 7, 2010  

Suggested Citation

Dimova, Ralitza D. and Sen, Kunal, Is Household Income Diversification a Means of Survival or a Means of Accumulation? Panel Data Evidence from Tanzania (April 6, 2010). Available at SSRN: https://ssrn.com/abstract=1688433

Contact Information

Ralitza D. Dimova (Contact Author)
Brunel University London - Economics and Finance ( email )
Uxbridge UB8 3PH
United Kingdom
IZA Institute of Labor Economics
Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Kunal Sen
University of Manchester ( email )
Oxford Road
Manchester, M13 9PL
United Kingdom
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