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Accounting for the Diversity of Rural Income Sources in Developing Countries: The Experience of the RIGA Project Katia Covarrubias, Ana Paula de la O & Alberto Zezza ESA Wye City Group Meeting on Statistics on Rural Development and Agriculture Household Income Rome, June 11-12, 2009
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The Rural Income Generating Activities Project Database of 34 living standards surveys Outputs: Income Aggregates Household Level Indicators Access to capital Demographic indicators Additional analysis-specific indicators Methodological Goal: Consistency and Comparability
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RIGA Data: 34 Survey Countries Africa Ghana GLSS (1992, 1998*) Kenya KIHBS (2005) Madagascar EPM (1993, 2001) Malawi IHS (2004*) Nigeria (2004*) Asia Bangladesh IHS (2000*, 2005) Cambodia SES (2004) Indonesia FLS (1992, 2000*) Nepal LSS (1996, 2003*) Pakistan HIES (1991, 2001) Vietnam LSS (1992, 1998*, 2002*) Eastern Europe/Central Asia Albania LSMS (2002, 2005*) Bulgaria IHS (1995, 2001*) Tajikistan LSMS (2003*, 2007) Latin America Bolivia EH (2005) Ecuador ECV (1995*, 1998) Guatemala ENCOVI (2000*, 2006) Nicaragua EMNV (1998*,2001*) Panama ENV (1997, 2003*) * Labor Data also Available at the Individual and Job Levels
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Income Aggregates: Defining Income Income must: Occur regularly Contribute to current economic well-being (available for current consumption) Income must not: Arise from a reduction in current net-worth Arise from an increase in household liabilities Source: ILO, Resolution I “Resolution concerning household income and expenditure statistics” Available from: http://www.ilo.org/public/english/bureau/stat/download/res/hiestat.pdf
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Income Aggregates: Basic Characteristics Household-level Labor data also available at the Job and Individual levels Annual Wage income data: also for daily and monthly time frames Net of costs Purchases and sales of durables, investments and windfall gains excluded Local currency units Rural (and urban) Outlier checks
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RIGA Issues and Lessons Learned Income Estimation
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Components of Total Household Income Dependent Wage Income agricultural non-agricultural Independent Crop Livestock Self Employment Transfers public private Other Sources
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Total Household Income Classifications Total Income: Agricultural: Agwge + Crop + Livestock Non-agricultural: Nonagwge + Selfemp + Transfers + Other On-farm: Crop + Livestock Off-farm: Agwage + Nonagwge + Selfemp + Transfers + Other Non-farm: Nonagwge + Selfemp
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Total Household Income Agwage Nonagwage Crop Livestock Selfemp TransferOther On-farm Agricultural Off-farm Non-Agricultural Non-farm
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Dealing with Costs Issue: Dealing with investment/durables expenditures Misclassification: bias total income Example: raw materials purchases (Albania; Vietnam) Recommendations: Clear classification of costs in survey instrument Appropriate choice of reference periods and frequencies
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Gross versus Net Issue: Inconsistent reporting & estimation of gross/net income Recommendations: In Qx: deductions and taxes should be asked about and reported In income estimation: Net: agricultural, self-employment and wage income Gross: rental income and transfer income
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RIGA Issues and Lessons Learned Questionnaire Design
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Reference Periods Issue: Defining appropriate reference periods Choice of Short v. Long seasonal fluctuations relevance to recall error link to survey timing phrasing of questions Recommendations: Reference periods should reflect frequency of Inc/Exp Short: Regular or frequent sources (food exp, wages, etc.) Long: Infrequent sources (business costs; ag inputs, etc.)
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Units & Coding Issue: Comparability and Standardization of Units and Coding Variability of unit reporting Lack of equivalence scales in data and documentation Inconsistency in units and codification of items across survey modules Agricultural Production and Food Expenditure modules Recommendations: YES to local unit reporting but: Inclusion of equivalence scales Consistency in codification within/across survey modules
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RIGA Lessons Learned From Key RIGA Results
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RIGA Results: Main Components of Rural Household Income For 9 out of the 16 countries analyzed, agriculture is the major source of income (ag wage labour + crop + livestock) However, share of rural non-agricultural income rises with GDP Off-farm income account for 50% in Latin America, Eastern-Europe and Asia (except Viet Nam). On-farm income tends to be more important for the African countries.
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RIGA Results: Main Components of Rural Household Income
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On-farm income falls and Non-farm rises......with increasing per capita GDP levels.
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RIGA Results: Diversification of Rural Household Income Defining Specialization and Diversification: Specialization >= 75% Diversification <75% Influenced by survey timing and reference period: seasonal diversification individuals member diversification
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Rural income diversification is the trend
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On-farm specialization falls with PCGDP...but Non-agricultural wage specialization rises.
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RIGA Results: Defining the Agricultural Household “Rural” as “Agricultural” lack of data to create comparable rural definition urban agriculture dwelling versus job location diversity of rural economy Thresholds of income Non-zero (basic participation) Higher cut-offs Occupation of the household head
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Lessons Learned: Definition of “Rural” Issues: Lack of a cross-country comparable definition of “rural” Rural Household vs. Location of Job RIGA uses survey-specific definition because it: reflects local information about what constitutes “rural” is used to administer government programs
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RIGA Results: S ensitivity and Criteria in Agricultural Households Definition Source: Aksoy, et al. (2009)
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Summary and Conclusions Estimation of Income Various approaches for characterizing household income Costs classification Reporting of deductions/taxes relevant Questionnaire Design: Reference periods should reflect frequency of income and expenditures Need for equivalence scales/conversion factors Unit and coding consistency within surveys. Analysis: Different definitions of agricultural household exist; generate differing characterization of results
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Thank You! Questions?
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