Rural household income diversification in developing countries: A Case study of Eritrea

¹ Don State Technical University, 1, Gagarina, sq., 344003, Rostov-on-Don, Russia
² Hamelmalo Agricultural College, Eritrea P.O. Box 397

^* Corresponding author: robeljan20134@gmail.com

Abstract

Following a baseline survey in Eritrea, income diversity study among rural farming households was conducted. Two steps analysis was followed during the analysis of income levels and diversity status: (1) the regional level, and (2) the household level. Simpson Index of Diversification was used to calculate the diversity status both at household and regional level. The analysis indicated that income diversification was pervasive in all regions and households irrespective of income levels. Although income diversification was more in high income groups, it was also substantial with the “extreme” and “low income” groups. The difference was that low income groups diversified in less risky ventures as a necessity, whereas the high income groups diversify even in more risky ventures as a choice. A Tobit regression model indicated that level of education, ethnicity, household size, gross income, income per capita, and access to credit had a positive relationship with income diversity. Others such as the age of the household head, dependency ratio and size of land ownership had a negative relationship. Therefore, policy measures need to be directed towards creating a conducive condition taking into consideration the multiple sources of income, socioeconomic, demographic and institutional conditions of rural farminghouseholds.