Ersado, Lire2012-06-182012-06-182006-07https://hdl.handle.net/10986/8389The 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.CC BY 3.0 IGOADJUSTMENT POLICIESADULT EQUIVALENTADVERSE EFFECTSAGRICULTURAL ACTIVITIESAGRICULTURAL SECTORAGRICULTURAL YIELDSAGRICULTUREASSET HOLDINGSCENSUS DATACHANGES IN POVERTYCONSUMERSCONSUMPTION EXPENDITURESCONSUMPTION EXPENDITURES PER CAPITACONSUMPTION LEVELSCOPING STRATEGYCREDIT MARKETCREDIT MARKETSCROSS-SECTIONAL DATADEMOGRAPHIC CHARACTERISTICSDEPENDENT VARIABLEDEREGULATIONDESCRIPTIVE STATISTICSDEVALUATIONDEVELOPING COUNTRIESDEVELOPING WORLDDEVELOPMENT AGENCIESDEVELOPMENT ECONOMICSDIFFERENCES IN INCOMEDIVERSIFICATIONDROUGHTECONOMIC DEVELOPMENTECONOMIC DOWNTURNSECONOMIC GROWTHECONOMIC REFORMECONOMIC SHOCKSEMPIRICAL ESTIMATIONEMPIRICAL MODELEMPIRICAL RESULTSEMPIRICAL STUDIESEMPIRICAL WORKEMPLOYMENT INCOMEENDOGENOUS VARIABLEEXCHANGE RATEEXPLANATORY POWEREXPLANATORY VARIABLEEXPLANATORY VARIABLESEXPORTSFAMINEFARM EMPLOYMENTFARM HOUSEHOLDSFARM INCOMEFARM INCOMESFEMALE-HEADED HOUSEHOLDSFOOD ITEMSFOOD MARKETSFOOD POLICYFOOD POVERTYFOOD POVERTY LINEFOOD PRODUCTIONGDP PER CAPITAGNPGOVERNMENT EXPENDITURESHOUSEHOLD CHARACTERISTICSHOUSEHOLD CONSUMPTIONHOUSEHOLD DATAHOUSEHOLD HEADHOUSEHOLD INCOMEHOUSEHOLD LEVELHOUSEHOLD LEVEL DATAHOUSEHOLD MEMBERSHOUSEHOLD SIZEHOUSEHOLD SURVEYHOUSEHOLD SURVEYSHOUSEHOLD WELFAREHUMAN CAPITALINCOMEINCOME GENERATIONINCOME INEQUALITYINCOME RISKINCOME SHAREINCOME SHARESINCOME SOURCEINCOME SOURCESINCREASE INCOME INEQUALITYINSURANCELABORLABOR MARKETSLABOUR INCOMELIQUIDITYLIVELIHOOD STRATEGIESMACROECONOMIC POLICIESMACROECONOMIC POLICYMARKETMARKET FAILURESNATIONAL INCOMENATIONAL SURVEYSNATURAL DISASTERSNATURAL LOGARITHMNEGATIVE EFFECTNONFARM INCOMEPER CAPITA CONSUMPTIONPERMANENT INCOMEPERMANENT INCOME HYPOTHESISPOLICY CHANGESPOLICY IMPLICATIONSPOLICY REFORMPOLICY RESEARCHPOLITICAL ECONOMYPOORPOOR HOUSEHOLDSPOORER HOUSEHOLDSPOSITIVE EFFECTPOSITIVE IMPACTPOVERTY REDUCTIONPUBLIC EXPENDITURESPUBLIC PROVISIONPUBLIC SECTORPUBLIC SPENDINGREAL GDPREFORM PROGRAMREGIONAL DIFFERENCESREGRESSION RESULTSRELATIVE CONTRIBUTIONSREMOTE AREASRISK MANAGEMENTRURALRURAL AREASRURAL COUNTERPARTSRURAL DEVELOPMENTRURAL HOUSEHOLDSRURAL INCOMERURAL LABORRURAL LINKAGESRURAL POORRURAL SECTORSSAFETY NETSSAVINGSSECTOR EMPLOYMENTSELF-EMPLOYMENTSIGNIFICANT IMPACTSOCIAL CAPITALSOCIAL DEVELOPMENTSTRATEGIC COMPLEMENTARITIESSTRUCTURAL ADJUSTMENTTARGETINGTRADE POLICIESUNDERESTIMATESUNEMPLOYMENTURBAN AREASURBAN HOUSEHOLDSVEGETABLE PRODUCTIONVULNERABLE GROUPSWAGE EMPLOYMENTWEALTHWELFARE IMPLICATIONSWELFARE MEASUREWorld Bank10.1596/1813-9450-3964