Policy Research Working Paper 7108

# **Abstract**

Is Africa’s rural economy transforming as its economies grow? This paper uses comparable income aggregates from 41 national household surveys from 22 countries to explore the extent of income diversification among rural households in Sub-Saharan Africa, and to look at how income diversification in Sub-Saharan Africa compares with other regions, taking into account differences in levels of development. The paper also seeks to understand how geography drives income diversification, focusing on the role of agricultural potential and distance to urban areas. The countries in the African sample have higher shares of on-farm income (63 versus 33 percent) and lower shares on nonagricultural wage income (8 and 21 percent) compared with countries of other regions. Specialization in on-farm activities continues to be the norm in rural Africa (52 percent of households, 21 percent in other regions). In terms of welfare, specialization in nonagricultural income-generating activities stochastically dominates farm-based strategies in all of the countries in our African sample. Crop income is still important for welfare, however, and even at higher levels of household income, crop activities continue to play an important complementary role. Regardless of distance and integration in the urban context, when agro-climatic conditions are favorable, farming remains the occupation of choice for most households in the African countries for which the study has geographically explicit information. When urban integration is low and agricultural conditions more difficult, the picture is mixed, with households more likely to engage more fully in nonfarm activities in Niger and Malawi, but less likely to do so in Uganda and Tanzania.

This paper is a product of the “Agriculture in Africa—Telling Facts from Myths” project managed by the Office of the Chief Economist , Africa Region of the World Bank, in collaboration with the Poverty and Inequality Unit, Development Economics Department of the World Bank, the African Development Bank, the Alliance for a Green Revolution in Africa, Cornell University, Food and Agriculture Organization, Maastricht School of Management, Trento University, University of Pretoria, and the University of Rome Tor Vergata. Co-funding by the African Development Bank, the Food and Agriculture Organization and the International Fund for Agricultural Development for this paper is gratefully acknowledged. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The authors of the paper may be contacted at azezza@worldbank.org.

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