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Income Diversification in Zimbabwe : Welfare Implications from Urban and Rural Areas

ADJUSTMENT POLICIES ADULT EQUIVALENT ADVERSE EFFECTS AGRICULTURAL ACTIVITIES AGRICULTURAL SECTOR AGRICULTURAL YIELDS AGRICULTURE ASSET HOLDINGS CENSUS DATA CHANGES IN POVERTY CONSUMERS CONSUMPTION EXPENDITURES CONSUMPTION EXPENDITURES PER CAPITA CONSUMPTION LEVELS COPING STRATEGY CREDIT MARKET CREDIT MARKETS CROSS-SECTIONAL DATA DEMOGRAPHIC CHARACTERISTICS DEPENDENT VARIABLE DEREGULATION DESCRIPTIVE STATISTICS DEVALUATION DEVELOPING COUNTRIES DEVELOPING WORLD DEVELOPMENT AGENCIES DEVELOPMENT ECONOMICS DIFFERENCES IN INCOME DIVERSIFICATION DROUGHT ECONOMIC DEVELOPMENT ECONOMIC DOWNTURNS ECONOMIC GROWTH ECONOMIC REFORM ECONOMIC SHOCKS EMPIRICAL ESTIMATION EMPIRICAL MODEL EMPIRICAL RESULTS EMPIRICAL STUDIES EMPIRICAL WORK EMPLOYMENT INCOME ENDOGENOUS VARIABLE EXCHANGE RATE EXPLANATORY POWER EXPLANATORY VARIABLE EXPLANATORY VARIABLES EXPORTS FAMINE FARM EMPLOYMENT FARM HOUSEHOLDS FARM INCOME FARM INCOMES FEMALE-HEADED HOUSEHOLDS FOOD ITEMS FOOD MARKETS FOOD POLICY FOOD POVERTY FOOD POVERTY LINE FOOD PRODUCTION GDP PER CAPITA GNP GOVERNMENT EXPENDITURES HOUSEHOLD CHARACTERISTICS HOUSEHOLD CONSUMPTION HOUSEHOLD DATA HOUSEHOLD HEAD HOUSEHOLD INCOME HOUSEHOLD LEVEL HOUSEHOLD LEVEL DATA HOUSEHOLD MEMBERS HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE HUMAN CAPITAL INCOME INCOME GENERATION INCOME INEQUALITY INCOME RISK INCOME SHARE INCOME SHARES INCOME SOURCE INCOME SOURCES INCREASE INCOME INEQUALITY INSURANCE LABOR LABOR MARKETS LABOUR INCOME LIQUIDITY LIVELIHOOD STRATEGIES MACROECONOMIC POLICIES MACROECONOMIC POLICY MARKET MARKET FAILURES NATIONAL INCOME NATIONAL SURVEYS NATURAL DISASTERS NATURAL LOGARITHM NEGATIVE EFFECT NONFARM INCOME PER CAPITA CONSUMPTION PERMANENT INCOME PERMANENT INCOME HYPOTHESIS POLICY CHANGES POLICY IMPLICATIONS POLICY REFORM POLICY RESEARCH POLITICAL ECONOMY POOR POOR HOUSEHOLDS POORER HOUSEHOLDS POSITIVE EFFECT POSITIVE IMPACT POVERTY REDUCTION PUBLIC EXPENDITURES PUBLIC PROVISION PUBLIC SECTOR PUBLIC SPENDING REAL GDP REFORM PROGRAM REGIONAL DIFFERENCES REGRESSION RESULTS RELATIVE CONTRIBUTIONS REMOTE AREAS RISK MANAGEMENT RURAL RURAL AREAS RURAL COUNTERPARTS RURAL DEVELOPMENT RURAL HOUSEHOLDS RURAL INCOME RURAL LABOR RURAL LINKAGES RURAL POOR RURAL SECTORS SAFETY NETS SAVINGS SECTOR EMPLOYMENT SELF-EMPLOYMENT SIGNIFICANT IMPACT SOCIAL CAPITAL SOCIAL DEVELOPMENT STRATEGIC COMPLEMENTARITIES STRUCTURAL ADJUSTMENT TARGETING TRADE POLICIES UNDERESTIMATES UNEMPLOYMENT URBAN AREAS URBAN HOUSEHOLDS VEGETABLE PRODUCTION VULNERABLE GROUPS WAGE EMPLOYMENT WEALTH WELFARE IMPLICATIONS WELFARE MEASURE
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World Bank, Washington, DC
Africa | Zimbabwe
2012-06-18T22:38:54Z | 2012-06-18T22:38:54Z | 2006-07

The author examines, taking into account the urban-rural divides, the changes and welfare implications of income diversification in Zimbabwe following macroeconomic policy changes and droughts of the early 1990s. Data from two comparable national income, consumption and expenditure surveys in 1990-91 and 1995-96, which straddled a period of economic volatility and natural disasters, show that the percentage of households earning income from private and informal sources grew considerably, while that from government and formal sources declined in the aftermath of the drought and policy changes. The author finds that, in general, rural households tend to have a more diversified portfolio of income compared with their urban counterparts, and the degree of diversification decreases with the level of urbanization. However, there are important differences in the level of diversification within the rural and urban areas depending on wealth: While the relatively better-off households have a more diversified income base in rural areas, it is the poor who pursue multiple income sources in urban areas. A decomposition of changes in welfare indicates that the total contribution of income diversification is large and increased between 1990-91 and 1995-96 in both urban and rural areas. On the other hand, there were significant declines in returns to human and physical capital assets during the same period. The findings suggest that households with a more diversified income base are better able to withstand the unfavorable impacts of the policy and weather shocks. The fact that relatively better-off households have a more diversified income base following the shocks implies that the poor are more vulnerable to economic changes unaccompanied by well-designed safety nets.

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