dependent crops such as maize.<sup>3</sup> The droughts lowered the asset base as many households sold their asset holdings in order to survive. The impact of the weather shocks, along with that associated with ESAP, was felt throughout the country.

Many of the ESAP reforms were not implemented as planned due to the droughts, which necessitated increased public spending. The economy failed to exhibit growth in the early 1990s, and the separate effects of droughts and ESAP are difficult to disentangle. The ESAP had negative effects on the poor in that prices rose due to removal of subsidies, and unemployment rose as public-sector employment fell due to retrenchments (Marquette 1997). It had a direct and immediate impact on the urban poor households, as their livelihood mainly depends on wage income and market purchase of consumption goods. Countrywide studies by Alwang et al. (2001) and others show that poverty has increased in Zimbabwe between 1990 and 1996. The prevalence, depth and severity of poverty have increased substantially. The data indicate that between the 1990 and 1995 survey periods mean real per adult equivalent consumption expenditures declined by about 29 percent and the median fell by 24 percent (table 6). Households in urban areas were hardest hit by these declines. The impact of these changes on the livelihood strategies of the poor is largely unknown.

# **3.  Income Diversification as a Risk Management Strategy**

Few households in developing countries derive the bulk of their income from a single source. The literature on livelihood sustainability under conditions of economic uncertainty concludes that most households avoid an extended period of dependence on only one or two sources of income (Reardon 1997; Bryceson 1999; Ellis 2000; Toulmin et al. 2000). Evidence abound which suggests that income diversification is a key way of ex ante risk management or ex post coping with shocks (Rosenzweig and Binswanger 1993; Reardon et al. 1992; Bryceson 1996 & 1999; Delgado and Siamwalla 1999; Barrett et al. 2001a). There are, in fact, several factors responsible for observed income diversification at the household level. These include: (a) selfinsurance against risk in the context of missing insurance and credit markets (e.g. Kinsey et al. 1998), (b) an ex-post coping strategy (e.g. Reardon et al. 1992), with extra individuals and extra jobs taken on to stem the decline in income, (c) an inability to specialize due to incomplete input markets, (d) a way of diversifying consumption in areas with incomplete output markets, (e) to exploit strategic complementarities and positive interactions between activities, and (f) simple aggregation effects where the returns to assets vary by individual or across time and space (Barrett et al. 2001b).

In rural areas of developing countries, diversification into non-farm income sources is growing over time and now accounts for a considerable share of household income. In an extensive analysis of household surveys from 1970s through the 1990s, Readon et al. (1998) find an average non-farm income share of 42% in Africa, followed by 40% in Latin America and 32% in Asia. Many studies in rural Africa find positive association between non-farm diversification and household welfare. On the basis of these findings, recommendations such as the promotion of off-farm employment in rural areas as a policy tool have gained widespread support by

> 3 But, coming on the heels of the earlier drought, it may have increased hardship, especially among the vulnerable groups in drought-prone areas.

3