Rural livelihood diversification and household well-being: Insights from Humla, Nepal

Abstract

Diversification of livelihoods is a commonly applied strategy for coping with economic and environmental shocks and instrumental in poverty reduction . In this paper, we have assessed the role of livelihood diversification in household well-being in Humla, a remote mountain district in west Nepal. Employing the data produced from household surveys, we developed a composite household well-being index incorporating four components and 15 indicators, and measured the effect of diversification on it. Results suggested a uniform pattern of diversification in terms of the number of activities undertaken for livelihoods but a highly varying degree of resultant well-being across households. Analysis showed that well-being was not associated with diversification per se but rather on a households' involvement in ‘high return sectors’ such as trade or salaried job. Because involvement in these remunerative sectors is determined by various financial, social and human capitals , poor households were unable to combat the entry barrier and were prevented from getting access to them. In this way, livelihood diversification was found to have a highly skewed effect leading to inequality of income and well-being. This, in turn, is likely to risk depriving the poor households from exploiting new economic opportunities even in the future.