This document summarizes a presentation on rural livelihood diversification in rice-based areas of Bangladesh. The presentation covers the background and objectives of the study, conceptual framework, methodology used, and results. The study assessed livelihood patterns and factors affecting diversification in 500 households across 12 villages in Bangladesh. It found that households have diversified their income sources beyond just farming. The average Simpson Diversification Index was 0.42, indicating medium levels of diversification on average. Regression analysis identified factors like household assets, education, credit access, and land size as influencing diversification.

1. RURAL LIVELIHOOD DIVERSIFICATION
IN RICE-BASED AREAS OF
BANGLADESH
Presented By
Md Tanvir Ahmed
MS Research Scholar
Social Sciences Division
International Rice Research Institute

2. Presentation Outline
 Background of the Study
 Study Objectives
 Conceptual Framework
 Methodology
 Results and Discussion
 Take home messages

3. Background of the Study
• It has been seen that, in rural Bangladesh, household income
is coming from various sources rather only from farming
• But there is not enough empirical evidence that measured the
diversification of income sources in Bangladesh
• Village Dynamics in South Asia (VDSA) project is collecting
income and employment data at rural household level.
• Rural livelihood diversification can be defined as the process
by which rural households construct an increasingly diverse
portfolio of activities and assets in order to survive and to
improve their standard of living (Ellis, 2000).

4. Study Objectives
The general objective is to assess the livelihood diversification
in rural rice-based areas of Bangladesh. Specifically;
• To identify the dominant patterns of rural livelihoods; and
• To determine the factors affecting rural livelihood
diversification

5. Conceptual Framework

6. Research Methodology
• Divisions: 6
• Districts: 11
• Study Villages: 12
Region Villages
Northern
Dharikamari
Rasun Shimulbari
Boikunthapur
Middle
Konapara
Nishaiganj
Patordia
South-Eastern
Bhabanipur
Begumpur
Paschim Bahadurpur
Dakkhin Kabir Kathi
Western
Khudiakhali
Khudiakhali
Study Location

7. Sampling Design, Sample Size and Data Collection
• Multi-stage random sampling technique
• 45 rural households were randomly chosen from each selected village
• Total 500 out of 540 households were included in the analysis as some
households’ data were incomplete
• Primary data were collected for the year of 2012-13 through face-
to-face interview using pre-tested semi-structured questionnaire.

8.  Analytical Tools
Descriptive Analysis : Summary statistics, frequency tables, percentage
Test of Significance : ANOVA test, t-test
Net Income from Crops:
NI = TR – TC
where,
NI = Net income (profit) from the respective crop per farm
TR = Total return per farm (included return from both
main product and by-products)
TC = Total cost pre farm

9.  Measuring of livelihood diversification
Simpson Diversification Index (SDI) was used to measure
the livelihood diversification. The formula is
where, n = Total number of income sources and
Pi = Income proportion of the i-th income source.
SDI values ranges from zero to 1. Households with highly
diversified incomes will have high SDI values, and lesser
diversified incomes will have lower SDI values.

10.  Based on the SDI values, the level of livelihood diversification was
defined as following:
LEVEL OF DIVERSIFICATION SDI VALUES
No diversification < 0.01
Low 0.01 - 0.25
Medium 0.26 - 0.50
High 0.51 - 0.75
Very high > = 0.76
 Based on the operating land holdings, households were
classified into four groups:
LAND CLASS AMOUNT OF LAND
Functionally Landless > = 0.2 ha
Small 0.21-0.80 ha
Medium 0.81-1.50 ha
Large > =1.51 ha

11. Definition of the explanatory variables used in the regression model
VARIABLE
NAME
DEFINITION MEASUREMENT
EXPECT
ED SIGN
Gender Gender of household head (dummy) 1= Male, 0 = Female +
Household size Total number of members in a household Number +
Farm size Amount of operating land holdings Hectare +/-
Member_org Member of any organization (dummy) 1 = yes
0 = No
+
Migrants Number of household members staying
outside of house (considering both domestic
and international migration)
Number -
Dev-Prog_parti Households’ participation in any govt.
Development program (dummy)
1 = yes
0 = No
+
Primary_occupati
on
Main occupation of the household head
(dummy)
1 = farming,
0 = otherwise
+
HH_Assets Estimated value of all physical assets owned
by a household, except the value of cultivable
land
BDT (Bangladesh
currency)
+/-
Dependency ratio Ratio of inactive person over active person Percentage -
Age_HH_Head Age of household head Years +/-
Edu_HH_Head Education of household head Year of schooling +
Amount of credit Received credit from any sources in a year BDT +
Amount of
savings
Money saved in any account in a year
BDT +/-
Distance_district
_town
Distance of household from the district town
Kilometre -
Distance_market
place
Distance of household from the nearest market
place
Kilometre -
Region_D1 Regional dummy 1= Northern region
0 = otherwise
+/-
Region_D2 Regional dummy 1= Middle region
0 = otherwise
+/-
Region_D3 Regional dummy 1= South-Eastern
region
0 = otherwise
+/-
Land_D1 Land class dummy 1= Landless
0 = otherwise
+/-
Land_D2 Land class dummy 1= Small land class
0 = otherwise
+/-
Land_D3 Land class dummy 1= Medium land less
0 = otherwise
+/-

12. Tobit Regression
SDI* = β0 + β1 Gender + β2 Household size + β3 Farm size + β4 Member_org
+ β5 Migrants + β6 Dev_prog_part + β7 HH_assets + β8
Primary_Occupation + β9 Dependency_ratio + β10 Age_HH_Head + β11
Edu-HH_Head + β12 Amount_credit + β13 Amount_savings + β14
Distance_district_town + β15 Distance_market + β16 Region_D1 + β17
Region_D2 + β18 Region_D3 + β19 Land_D1 + β20 Land_D2 + β21
Land_D3+ μi
if SDI* > 0
= 0 Otherwise
where,
SDI* = Livelihood diversification index
β0 = Intercept
μi = Error term, which is normally distributed with mean zero and
constant variance

13. RESULTS AND DISCUSSION
Socio-Economic and Demographic Characteristics of Respondent
Households
CHARACTERISTICS UNIT (%) MEAN (+ STD.)
Gender
Male headed household % 85.2
Female Headed household % 14.8
Age of HH Head (Years) 51.35 13.908
Age range of all members
0-14 % 26.6
15-64 % 67.4
65 > = % 6.0
Dependency ratio % 56.9
Household size Number 5.33 2.424
Male Number 2.79 1.530
Female Number 2.54 1.388
Adult literacy rate % 83.8
Male % 88.7
Female % 78.9
Farm size (ha) 0.45 0.551
Land ownership class
Functionally landless % 28.2
Small % 43.0
Medium % 19.6
Large % 9.2
Land-Man ratio ha/person 0.21 0.245
Household Assets BDT (USD) 382,331
(4,780)
562073.9
Households with access to
credit
% 43.4
Households who saved
money in financial
institutions
% 57.2

14. Household Income Sources and Their Share
Income from all the sources were categorised into nine
groups.
1. Rice crop
2. Non-rice crops
3. Non-crop Agriculture
4. Agricultural laborer
5. Non-agricultural laborer
6. Business and caste occupation
7. Salaried job and services
8. Remittance
9. Transfer Payment
Farm Income
Non-Farm Income
Off-Farm Income

15. Household Yearly Total Income from All
Sources and Their Share
 Average yearly income and share by sources of income
SOURCE OF INCOME
AMOUNT OF INCOME SHARE OF
INCOME (%)BDT/YEAR USD/YEAR
Rice Crop 30,415 380 16
Non-rice Crops 16,152 202 8
Non-crop agriculture 17,668 221 9
Agricultural laborer 4,864 61 3
Non-agricultural laborer 13,714 171 7
Business and caste occupation 38,992 487 20
Salaried job and services 12,427 155 6
Remittances 55,888 699 29
Transfer Payment 1,282 16 1
Total 191,402 2,393 100
F-value of ANOVA 14.27 (P = 0.000)

16.  Share (%) of different sources in total household income across four
regions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Northern
region
Middle
region
South-Eastern
region
Western
region
Income share (%) in four regions
Transfer payment
Remittances
Salaried job and services
Business and caste occupation
Non-agricultural laborer
Agriculturallaborer
Non-crop agriculture
Non-rice crops
Rice crop
69.3% 67.6% 75.1% 72.3%

17. Farm, Off-farm and Non-farm Income
 Farm and non-farm income and their share
SOURCE OF
INCOME
AMOUNT OF INCOME SHARE OF
INCOME (%)BDT/YEAR USD/YEAR
Farm 64,235 803 33.6
Off-farm 4,864 61 2.5
Non-farm 122,303 1,529 63.9
Total 191,402 2,393 100.0
Farm
income
34%
Off-farm
income
2%
Non-farm
income
64%
Share of farm, off-farm and non-
farm income

18. Household Livelihood Diversification
 Distribution of households across the level of diversification
LEVEL OF DIVERSIFICATION
NUMBER OF
HOUSEHOLD
PERCENTAGE (%)
No 30 6.0
Low 98 19.6
Medium 159 31.8
High 192 38.4
Very high 21 4.2

19.  Average SDI values by region
 Distribution (%) of households into different level of diversification by
regions
 Most of the households from all four regions have diversified their
livelihoods in to “medium” and “high” level.
REGION
LEVEL OF DIVERSIFICATION
Total
No (%) Low (%)
Medium
(%)
High
(%)
Very high
(%)
Northern 2.4 12.8 43.2 38.4 3.2
100.0
Middle 10.9 24.2 28.9 32.8 3.1
100.0
South-Eastern 6.6 16.3 25.9 43.4 7.8
100.0
Western 2.5 29.6 30.9 37.0 0.0
100.0
All 6 19.6 31.8 38.4 4.2
100.0
REGION NO. OF HOUSEHOLD AVERAGE VALUE OF SDI
Northern 125 0.45
Middle 128 0.37
South-Eastern 166 0.46
Western 81 0.39
All 500 0.42

20.  Distribution of household (%) at different level of livelihood diversification by
region

21.  Average SDI values by household land class
 Distribution (%) of households into different level of diversification by
household land class
 highest percentage of small (47%) and medium (46%) land holding
households had high level of livelihood diversification
LAND CLASS
LEVEL OF DIVERSIFICATION
TOTALNo
(%)
Low
(%)
Medium
(%)
High
(%)
Very high
(%)
Functionally Landless 7.1 31.2 34.8 24.1 2.8 100.0
Small 5.6 16.7 25.1 46.5 6.0 100.0
Medium 6.1 11.2 31.6 45.9 5.1 100.0
Large 4.3 15.2 54.3 26.1 0.0 100.0
All 6.0 19.6 31.8 38.2 4.4 100.0
LAND CLASS AVERAGE VALUE OF SDI
Functionally landless 0.34
Small 0.46
Medium 0.47
Large 0.40

22.  Distribution of household (%) at different level of livelihood diversification by
household land class

23.  Correlation analysis among the explanatory variables
Factors Affecting Livelihood Diversification
land_d3 -0.1195 0.0524 -0.0472 -0.0699 -0.3094 -0.4288 1.0000
land_d2 0.1806 -0.1003 0.0552 0.1511 -0.5443 1.0000
land_d1 -0.1086 0.0488 -0.0112 -0.1115 1.0000
region_d3 0.2813 -0.4070 -0.4135 1.0000
region_d2 0.5850 -0.3387 1.0000
region_d1 -0.6079 1.0000
distant_di~n 1.0000
distan~n region~1 region~2 region~3 land_d1 land_d2 land_d3
land_d3 0.1065 0.1279 0.3322 -0.0993 0.0356 -0.0572 0.3250 0.1721 -0.0466 0.0375 0.3777 0.0335 -0.0599 -0.0694 -0.0104
land_d2 0.0207 -0.0156 -0.1745 -0.0293 0.0221 -0.0479 0.0385 -0.1206 -0.0105 0.0623 -0.1176 0.0261 -0.0204 0.0079 -0.0780
land_d1 -0.1644 -0.2621 -0.4479 0.1792 -0.1489 0.1000 -0.3892 -0.2106 0.0385 -0.2072 -0.4634 -0.1290 -0.0394 -0.0881 -0.0470
region_d3 -0.1128 0.3137 0.0022 -0.1436 0.3488 0.0477 0.1143 0.1158 0.1037 0.1267 -0.0988 0.0241 0.1466 0.1930 -0.2546
region_d2 -0.0394 -0.0709 -0.1059 -0.1717 -0.0482 -0.1012 -0.0906 -0.1318 0.0342 0.0023 -0.0988 -0.1234 -0.1053 -0.0603 0.0606
region_d1 0.0976 -0.1707 0.1229 0.1284 -0.1824 0.1582 -0.0047 -0.0838 -0.0846 -0.0409 0.2098 0.0239 -0.0347 -0.0938 0.3182
distant_di~n -0.0224 0.1444 -0.0893 -0.2315 0.1547 -0.0054 -0.0377 -0.0998 0.1357 0.0290 -0.1496 0.0035 -0.0369 -0.0681 0.1710
distance_n~t 0.1253 -0.0569 0.1814 0.0298 -0.0990 0.1822 -0.0389 -0.0863 0.0269 -0.0386 0.2350 0.0696 -0.0377 -0.0852 1.0000
savings -0.1413 0.1837 0.0470 -0.0233 0.2212 -0.0272 -0.0472 0.2386 -0.0044 0.1286 -0.0238 -0.0689 0.1957 1.0000
borrowing 0.0052 0.2040 0.1968 0.0903 0.2445 -0.0007 -0.0723 0.3380 0.0230 0.0162 0.0878 0.1231 1.0000
edu_head 0.0917 0.0376 0.0792 -0.0477 0.0231 -0.0549 -0.0507 0.2197 0.0096 -0.1863 0.0839 1.0000
land_manra~o 0.2284 -0.0309 0.8470 -0.1049 -0.1073 -0.0193 0.4112 0.1267 -0.0766 0.0165 1.0000
age_hh_head 0.1853 0.2740 0.0998 -0.1231 0.2792 -0.0728 0.1336 0.1076 -0.0548 1.0000
dependency~o -0.0333 0.1277 -0.0375 -0.0230 -0.0299 0.2138 -0.0754 -0.0331 1.0000
hh_assets -0.0551 0.3625 0.2342 -0.0516 0.3117 -0.0591 0.0198 1.0000
primaryocc~n 0.3433 0.1561 0.4005 -0.1922 0.0290 -0.0785 1.0000
dev_prog_p~i 0.0496 0.0860 0.0124 0.2103 -0.0875 1.0000
migrants -0.1710 0.6392 0.0659 -0.1248 1.0000
member_org 0.0401 -0.0730 -0.1237 1.0000
farm_size 0.2378 0.3223 1.0000
family_size 0.0455 1.0000
gender_hh_~d 1.0000
gender~d family~e farm_s~e member~g migrants dev_pr~i primar~n hh_ass~s depend~o age_hh~d land_m~o edu_head borrow~g savings distan~t
(obs=500)
> _head borrowing savings distance_nearmarket distant_district_town region_d1 region_d2 region_d3 land_d1 land_d2 land_d3
. corr gender_hh_head family_size farm_size member_org migrants dev_prog_parti primaryoccupation hh_assets dependency_ratio age_hh_head land_manratio edu

24. Variance Inflation Factor (VIF) analysis
.
Mean VIF 2.69
dependency~o 1.13 0.884820
edu_head 1.24 0.803482
dev_prog_p~i 1.25 0.799907
member_org 1.28 0.782590
savings 1.28 0.779260
borrowing 1.31 0.760789
age_hh_head 1.34 0.747017
gender_hh_~d 1.41 0.708978
hh_assets 1.58 0.634177
primaryocc~n 1.61 0.621083
distance_n~t 1.92 0.521119
migrants 2.20 0.454858
family_size 2.33 0.429738
region_d1 2.55 0.392273
farm_size 2.60 0.384476
land_d3 3.35 0.298261
region_d3 4.51 0.221857
region_d2 5.00 0.199849
distant_di~n 5.49 0.182091
land_d2 6.12 0.163325
land_d1 6.90 0.144865
Variable VIF 1/VIF
. vif

25.  Test of Heteroscedasticity
Auxiliary regression
Breusch-Pegan / Cook- Weisberg test (hettest test)
_cons .0606118 .006859 8.84 0.000 .0471356 .0740881
sdihat -.05363 .0155187 -3.46 0.001 -.0841201 -.0231398
error2 Coef. Std. Err. t P>|t| [95% Conf. Interval]
Total 1.00931482 499 .002022675 Root MSE = .04449
Adj R-squared = 0.0215
Residual .985676826 498 .001979271 R-squared = 0.0234
Model .023637993 1 .023637993 Prob > F = 0.0006
F( 1, 498) = 11.94
Source SS df MS Number of obs = 500
. reg error2 sdihat
Prob > chi2 = 0.0042
chi2(1) = 8.22
Variables: fitted values of sdi
Ho: Constant variance
Breusch-Pagan / Cook-Weisberg test for heteroskedasticity
. hettest

26. Tobit (Multiplicative Heteroscedasticity) regression results
VARIABLES COEFFICIENTS STD. ERR. Z-VALUE P-VALUE
Intercept 0.1441 0.0687 2.10 0.036
Gender of household head 0.1366 0.0349 3.91 0.000
Household size 0.0209 0.0038 5.53 0.000
Farm size 0.0140 0.0114 1.23 0.219
Member of any organization 0.0148 0.0189 0.78 0.433
Migrants -0.0270 0.0061 -4.43 0.000
Development program participation 0.1054 0.0247 4.27 0.000
Household assets -8.73e-08 1.97e-08 -4.42 0.000
Primary occupation -0.0128 0.0199 -0.65 0.518
Dependency ratio -0.0007 0.0002 -3.83 0.000
Age of household head 0.00002 0.0008 0.02 0.981
Education of household head -0.0077 0.0019 -4.08 0.000
Amount of credit 1.12e-07 2.66e-08 4.21 0.000
Amount of savings -3.05e-07 9.89e-08 -3.08 0.002
Distant to nearer district town 0.0019 0.0013 1.48 0.138
Distance to nearer market 0.0106 0.0078 1.36 0.173
Region_dummy1 0.0142 0.0316 0.45 0.653
Region_dummy2 -0.0651 0.0386 -1.69 0.092
Region _dummy3 0.0719 0.0348 2.06 0.039
Land class _dummy1 -0.0732 0.0370 -1.98 0.048
Land class_dummy2 0.0694 0.0287 2.42 0.015
Land class_dummy3 0.0692 0.0289 2.40 0.017
Sigma 0.1821
LR chi2(21)
Prob > chi2
-40.47
1.00
Log likelihood 86.03

27. Marginal effect
VARIABLES DY/DX STD. ERR. Z- VALUE P-VALUE
Gender of household head 0.1366 0.0350 3.91 0.000
Household size 0.0209 0.0038 5.53 0.000
Farm size 0.0140 0.0114 1.23 0.219
Member of any organization 0.0148 0.0189 0.78 0.433
Migrants -0.0270 0.0061 -4.43 0.000
Development program participation 0.1054 0.0247 4.27 0.000
Household assets -8.73e-08 0.0000 -4.42 0.000
Primary occupation -0.0128 0.0199 -0.65 0.518
Dependency ratio -0.0007 0.0002 -3.83 0.000
Age of household head 0.00002 0.0008 0.02 0.981
Education of household head -0.0077 0.0019 -4.08 0.000
Amount of credit 1.12e-07 0.0000 4.21 0.000
Amount of savings -3.05e-07 0.0000 -3.08 0.002
Distant to nearer district town 0.0019 0.0013 1.48 0.138
Distance to nearer market 0.0106 0.0078 1.36 0.173
Region_dummy1 0.0142 0.0316 0.45 0.653
Region_dummy2 -0.0651 0.0386 -1.69 0.092
Region _dummy3 0.0719 0.0348 2.06 0.039
Land class _dummy1 -0.0732 0.037 -1.98 0.048
Land class_dummy2 0.0694 0.0287 2.42 0.015
Land class_dummy3 0.0692 0.0289 2.4 0.017

28. Take Home Messages
• Rural households in Bangladesh are diversifying their
livelihoods mostly at “medium” level
• South-Eastern region has highest livelihood diversification
while Middle region has the lowest.
• Small and Medium land holding households have higher level
of livelihood diversification than Landless and large land
holding households.
• Non-farm income contributes more in total household income,
hence it should be encouraged to expand non-farm
employment opportunities.
• Functionally landless households should be given more
attention to increase and diversify their incomes.

29. Maraming salamat po!