Drivers of Households’ off-the-farm Income Diversification Patterns in Nigeria: Panel Evidence Using General Household Survey Data

Abstract

This study examines the drivers of households’ off-the-farm income diversification patterns using four waves of the Nigeria General Household Survey panel data. The study further investigates the motives for households’ off-the-farm income diversification patterns. The Simpson Income Diversification index and count index were used to measure income diversification. The results of heteroscedastic fractional probit correlated random effects and Poisson fixed effects indicate that the level of diversifying off-the-farm income is driven by attributes of household such as assets value, household size, female headship, level of education, dependency ratio, access to credit, distance to tarred road and geographical location of household at the national level. The study found that the motive for accumulation drives households’ off-the-farm income diversification rather than the motive for survival. Specifically, non-poor households in the urban sector seem more probable to expand into off-the-farm income enterprises than poor rural households. A major finding is that the choice of off-the-farm income diversification proxy has a great influence on the drivers.