Income Diversification and Agricultural Intensification of Rural Households in Nigeria: Synergies and Tradeoffs

Abstract

This study examines the relationship between income diversification and agricultural intensification of rural households in Nigeria, using panel data models. We use the Inverse Herfindahl Index (IHI) to measure the income diversification options, while the relationship with agricultural intensification was measured using random effect instrumental variable regression. A control function approach was used to control for the potential endogeneity of the covariates. Empirical findings of this study indicate that income diversification is increasing among Nigerian rural households. This study finds that among other factors, off-farm income has a positive relationship with agricultural intensification. This study recommends, as a policy measure, that households should not only be encouraged to diversify their income, but should also transmit productivity gains from such diversification into agricultural intensification for the betterment of the rural economy.