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Accounting for the Diversity of Rural Income Sources in Developing Countries: The Experience of t h e 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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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: 34Survey 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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Issues and Lessons Learned

Income Estimation


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Dependent

Wage Income

agricultural

non-agricultural

Independent

Crop

Livestock

Self Employment

Transfers

public

private

Other Sources

Components of Total Household Income


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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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Crop

Agwage

Livestock

Transfer

Other

Nonagwage

Selfemp

Total Household Income

Agricultural

On-farm

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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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 frequencyof 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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Lessons Learned

From Key RIGA Results


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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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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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RIGA Results: Sensitivity 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 frequencyof 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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