Accounting for the Diversity of Rural
Income Sources in Developing Countries:
The Experience of the RIGA Project
Katia Covarrubias, Ana Paula de la O & Alberto Zezza
ESA
Wye City Group Meeting on Statistics on Rural Development and Agriculture
Household Income
Rome, June 11-12, 2009
The Rural Income Generating Activities
Project
Database of 34 living standards surveys
 Outputs:



Income Aggregates
Household Level Indicators




Access to capital
Demographic indicators
Additional analysis-specific indicators
Methodological Goal: Consistency and
Comparability
RIGA Data: 34 Survey Countries

Africa
 Ghana GLSS (1992, 1998*)
 Kenya KIHBS (2005)
 Madagascar EPM (1993, 2001)
 Malawi IHS (2004*)
 Nigeria (2004*)

Asia
 Bangladesh IHS (2000*, 2005)
 Cambodia SES (2004)
 Indonesia FLS (1992, 2000*)
 Nepal LSS (1996, 2003*)
 Pakistan HIES (1991, 2001)
 Vietnam LSS (1992, 1998*, 2002*)

Eastern Europe/Central Asia
 Albania LSMS (2002, 2005*)
 Bulgaria IHS (1995, 2001*)
 Tajikistan LSMS (2003*, 2007)

Latin America
 Bolivia EH (2005)
 Ecuador ECV (1995*, 1998)
 Guatemala ENCOVI (2000*, 2006)
 Nicaragua EMNV (1998*,2001*)
 Panama ENV (1997, 2003*)
* Labor Data also Available at the Individual and Job Levels
Income Aggregates:
Defining Income
Income must:
 Occur regularly
 Contribute to current economic well-being (available
for current consumption)
Income must not:
 Arise from a reduction in current net-worth
 Arise from an increase in household liabilities
Source: ILO, Resolution I “Resolution concerning household income and expenditure statistics”
Available from: http://www.ilo.org/public/english/bureau/stat/download/res/hiestat.pdf
Income Aggregates:
Basic Characteristics

Household-level


Annual






Labor data also available at the Job and Individual levels
Wage income data: also for daily and monthly time frames
Net of costs
Purchases and sales of durables, investments and
windfall gains excluded
Local currency units
Rural (and urban)
Outlier checks
Issues and Lessons Learned
Income Estimation
RIGA
Components of Total Household Income

Dependent
Wage Income


agricultural
non-agricultural
Independent




Crop
Livestock
Self Employment
Transfers



public
private
Other Sources
Total Household Income Classifications
Total Income:
Yi  Agwgei  Nonagwgei  Cropi  Livestocki  Selfempi  Transferi  Otheri
Yi  Agriculturali  Nonagriculturali
Agricultural:
Non-agricultural:
Agwge + Crop + Livestock
Nonagwge + Selfemp + Transfers + Other
Yi  Onfarmi  Offarmi
On-farm: Crop + Livestock
Off-farm: Agwage + Nonagwge + Selfemp + Transfers + Other
Non-farm: Nonagwge + Selfemp
Total Household Income
Agricultural
On-farm
Livestock
Crop
Agwage
Off-farm
Non-Agricultural
Transfer
Non-farm
Nonagwage
Selfemp
Other
Dealing with Costs
Issue: Dealing with investment/durables expenditures
 Misclassification: bias total income
 Example: raw materials purchases (Albania; Vietnam)
Recommendations:
 Clear classification of costs in survey instrument
 Appropriate choice of reference periods and frequencies
Gross versus Net
Issue: Inconsistent reporting & estimation of gross/net income
Recommendations:
 In Qx: deductions and taxes should be asked about and
reported
 In income estimation:
 Net: agricultural, self-employment and wage income
 Gross: rental income and transfer income
Issues and Lessons Learned
Questionnaire Design
RIGA
Reference Periods
Issue: Defining appropriate reference periods
 Choice of Short v. Long




seasonal fluctuations
relevance to recall error
link to survey timing
phrasing of questions
Recommendations:
 Reference periods should reflect frequency of Inc/Exp
 Short: Regular or frequent sources (food exp, wages, etc.)
 Long: Infrequent sources (business costs; ag inputs, etc.)
Units & Coding
Issue: Comparability and Standardization of Units and Coding
 Variability of unit reporting
 Lack of equivalence scales in data and documentation
 Inconsistency in units and codification of items across survey
modules

Agricultural Production and Food Expenditure modules
Recommendations: YES to local unit reporting but:
 Inclusion of equivalence scales
 Consistency in codification within/across survey modules
Lessons Learned
From Key RIGA Results
RIGA
RIGA Results:
Main Components of Rural Household Income
On farm Activities
Agricultural Wages
Transfers and Other Non-Labour Sources
Non-farm Activities
Note: 1. Surveys sorted by increasing per capita GDP
2. Expenditure quintiles move from poorer to richer
03
PA
N
01
BU
L
95
U
05
EC
B
AL
G
U
A
00
00
IN
D
01
N
IC
01
PA
K
04
IG
N
VN
M
98
03
TA
J
A
98
03
G
H
EP
N
G
00
93
BN
AD
M
M
AL
04
0
20
40
60
80
100
Share of total income from main income generating activities
by expenditure quintiles
On-farm income falls and Non-farm rises...
Share of On-farm Income by Per Capita GDP
Share of Non-farm Income by Per Capita GDP
70
60
MAD 93
MAL 04
NIG 04
ECU 95
40
TAJ 03
30
NEP 03
20
PAK 01
GUA 00
NIC 01
50
VNM 98
IND 00
GUA 00
BNG 00
GHA 98
ALB 05
ALB 05
VNM 98
NEP 03
NIG 04
BUL 01
30
NIC 01
IND 00
BNG 00
PAK 01
40
GHA 98
Share of Income from Non-farm Sources
60
50
PAN 03
10
ECU 95
BUL 01
PAN 03
20
6.5
7
7.5
8
Log Per Capita GDP (PPP, Constant 2005 $)
Note: On-farm income is comprised of income earned from crop and livestock activities.
2. Fitted curve fits the quadratic prediction of the income shares on per capita GDP.
8.5
TAJ 03
MAD 93
MAL 04
9
6.5
7
7.5
8
Log Per Capita GDP (PPP, Constant 2005 $)
8.5
Note: Non-farm income is comprised of income earned from non-agricultural wages and self employment.
...with increasing per capita GDP
levels.
9
RIGA Results:
Diversification of Rural Household Income
Defining Specialization and Diversification:
 Specialization >= 75%
 Diversification <75%
Influenced by survey timing and reference period:
 seasonal diversification
 individuals member diversification
Rural income diversification is the trend
On-farm specialization falls with PCGDP
Specialization in Non-Agricultural Wage Labour by Per Capita GDP
40
50
On-Farm Specialization by Per Capita GDP
MAD 93
PAN 03
NIG 04
20
TAJ 03
10
NEP 03
ECU 95
30
NIC 01
PAK 01
GUA 00
BUL 01
IND 00
ALB 05
20
VNM 98
BNG 00
NEP 03
TAJ 03
GHA 98
PAK 01
10
30
GHA 98
Share of Households Specialized in Non-Agricultural Wages (%)
40
MAL 04
NIC 01
MAL 04
ALB 05
IND 00
NIG 04
MAD 93
VNM 98
GUA 00
ECU 95
0
PAN 03
BUL 01
6.5
7
7.5
8
Log Per Capita GDP (PPP, Constant 2005 $)
8.5
9
0
BNG 00
6.5
7
7.5
8
Log Per Capita GDP (PPP, Constant 2005 $)
8.5
9
...but Non-agricultural wage specialization
rises.
RIGA Results:
Defining the Agricultural Household

“Rural” as “Agricultural”





Thresholds of income



lack of data to create comparable rural definition
urban agriculture
dwelling versus job location
diversity of rural economy
Non-zero (basic participation)
Higher cut-offs
Occupation of the household head
RIGA Results: Sensitivity and Criteria in
Agricultural Households Definition
Survey
Percent
Rural
Shares of Households
with Positive
Agricultural Income
Shares of Households
with Agricultural
Income > 30%
Share of Agricultural
Households by
Occupation
Total
20.3
19.9
26.7
28.7
52.2
58.4
31.4
71.7
52.3
37.3
62.3
63.5
26.7
59.8
77.5
Total
36.4
26.4
33.0
29.8
48.4
68.0
38.7
n.a.
49.7
31.5
60.8
62.3
48.2
49.5
66.3
45.92
46.4
Peru (2003)
Ecuador (1995)
Bolivia (2002)
Nicaragua (2001)
Zambia (1998)
Ethiopia (2000)
Guatemala (2000)
Cambodia (1999)
Ghana (1998)
Pakistan (2001)
Vietnam (1998)
Madagascar (2001)
Bangladesh (2000)
Nepal (2003)
Malawi (2004)
35.9
37.4
42
43.9
47.8
50.7
56.7
60
63.3
71
71.2
75.8
79.7
87.4
88.1
Total
37.5
43.9
96
80.5
70.1
71.3
70.2
86.1
65.5
55.9
92.7
71.2
61.3
90.6
89
Unweighted average
60.72
72.12
Source: Aksoy, et al. (2009)
Summary and Conclusions

Estimation of Income




Questionnaire Design:




Various approaches for characterizing household income
Costs classification
Reporting of deductions/taxes relevant
Reference periods should reflect frequency of income and
expenditures
Need for equivalence scales/conversion factors
Unit and coding consistency within surveys.
Analysis:

Different definitions of agricultural household exist; generate
differing characterization of results
Thank You!
Questions?