Abstract:
Pakistan’s agricultural sector has experienced restructuring over the last
decade, from changes in land markets to the move toward nonagricultural labor
markets. However, agriculture remains one of the most important sources of livelihood,
accounting for 45 percent of the country’s workforce.It is also a key policymaking area,
but the role of small farmers in poverty reduction is still being examined. The future
of small farms cannot be viewed in isolation, that is, without taking into account their
synergies with nonfarm rural activities. We measure the impact of diversifying sources
of livelihood on household income and consumption among small farms in rural
Pakistan. Using a balanced panel of 2,058 households from the Pakistan Panel
Household Survey (2001–10), we find that both consumption and income are (i)
significantly higher for households that have diversified their sources of income and
(ii) diversified households also plant greater varieties of crops. These results suggest
that nonagricultural activities tend to complement agricultural activities with a view
to improving welfare in a rural economy.
