Reassessing transformation pathways: Global trends in rural household farm and non-farm livelihood strategies with a spotlight on Sub-Saharan Africa

Abstract

This paper investigates how household income strategies evolve amidst ongoing structural transformation in lower and middle-income countries, with a particular focus on Sub-Saharan Africa (SSA). We examine whether rural households in developing countries follow the expected livelihood pathways that have historically accompanied structural transformation. Given the divergent trends suggested by previous studies in SSA, we also explore which livelihood pathways might offer greater poverty reduction potential in SSA and other developing regions. Using a harmonized dataset from 41 countries and 103 nationally representative surveys, we analyze participation in various income-generating activities and the impact on household income and welfare. This study characterizes income specialization or diversification within households and estimates the relationship between each income source and overall per capita household income as well as the correlation between different livelihood pathways and poverty reduction across expenditure levels. Our findings reveal highly diversified income strategies globally. However, countries in SSA show greater specialization in on-farm income-generating activities compared to Rest of the World (ROW) countries at similar levels of GDP per capita. This divergence raises questions about the nature of structural change in SSA and suggests different transformation pathways, notably towards self-employment in the services sector and less towards non-agricultural wage employment. The study has significant policy implications, highlighting SSA’s emerging different path in structural transformation, which highlight the need for rural development strategies that both enhance the productivity of on-farm income sources as well as growth of the off-farm rural economy.