Quarterly Journal of International Agriculture No. 1/05
Income diversification of rural households in Central Sulawesi, Indonesia
Stefan Schwarze and Manfred Zeller
Georg August University Goettingen, Germany
Abstract
This paper examines two aspects of income diversification:
diversification as a shift away from agricultural activities and as an
increasing mix of income activities. Agricultural activities are the
most important source of income for rural households in the vicinity of
the Lore Lindu National Park in Indonesia. They contribute 68% to total
household income with the remaining 32% originating from
non-agricultural activities. Considering the wealth status shows that
the better-off households derive 40% of their income from
non-agricultural activities whereas it accounts for only 10% of the
poorest households’ income. Using a Tobit model to evaluate the
determinants of non-farm income diversification shows that the
socio-economic status and the access to formal financial markets both
have a positive impact. As a measure of the overall diversity of income
we apply the Shannon equitability index, which increases with the
number of income source and their evenness. The access to social
capital and the occurrence of crop failures both have a positive impact
on the Shannon equitability index, whereas the socio-economic status
and the distance to roads have a negative influence.
Keywords: income diversification, rural households, Shannon index, Tobit model, Indonesia
Vol. 44 (2005), No. 1: 61-73