Title page for ETD etd-08072008-160745

Type of Document Master's Thesis
Author Andrade, Robert Santiago
Author's Email Address andrader@vt.edu
URN etd-08072008-160745
Title Livelihood strategies of farmers in Bolivar, Ecuador: asset distribution, activity selection and income generation decisions in rural households
Degree Master of Science
Department Agricultural and Applied Economics
Advisory Committee
Advisor Name Title
Alwang, Jeffrey R. Committee Chair
Kuminoff, Nicolai V. Committee Member
Norton, George W. Committee Member
  • livelihood strategies
  • well-being
Date of Defense 2008-06-10
Availability unrestricted
Households in rural Ecuador face several challenges. One of them is the severe

deprivation that reaches alarming percentages in the countryside. Unequal distribution

and limited assets constrain households from improving their economic conditions. These

factors induce households to overexploit natural resources. Poor households engage in a

variety of livelihood strategies. Livelihood strategies are characterized by the allocation

of assets (natural, physical, financial, public, social and human), income-earning

activities (on farm, off farm), and outcomes (food, income, security). Together these

determine the well-being attained by an individual or households.

We used data collected by INIAP as part of the SANREM-CRSP project to identify

livelihood strategies, their determinants, and well-being implications of adopting a

particular livelihood. These data were from a comprehensive survey of 286 households

collected during September and November, 2006.

Livelihood strategies for the Chimbo watershed were identified using qualitative and

quantitative methods. The methods provide similar results and identified four main

livelihoods: households engaged in diversified activities, agricultural markets, non-farm

activities, and agricultural wage work. Most households are engaged in agricultural

markets followed by households in diversified activities. Households engaged in

agricultural markets own higher amounts of natural and physical resources, while

households engaged in non-farm activities have, on average, more human capital.


Households participating in agricultural wage work are mainly from the down-stream

watershed and posses less natural, physical and human assets.

Factors influencing the selection of livelihood strategies were examined using a

multinomial logit model. Variables such as access to irrigation, amount of farm surface

and value of physical assets were statistically significant determinants of livelihood

selection. Households with higher endowments of natural and physical assets are more

likely to engage in agricultural markets and less likely to participate in non-farm

activities. Secondary education tends to decrease participation in the agricultural sector

while increasing engagement in non-farm activities. Several geographic variables like

watershed location, altitude, and distance to rivers and cities are statistically significant

determinants of livelihood strategies.

The well-being associated with each livelihood strategy was estimated using least

squares corrected for selection bias. Since participation in each livelihood is

endogenously selected it was necessary to correct for selection. We use the Dubin-

McFadden (1984) correction, based on the multinomial logit model.

In our models of well-being few variables were statistically significant; this may be

due to data limitations. Credit is statistically significant and has a positive effect on wellbeing.

A similar positive effect is shown by education but the variable is not statistically

significant. An odd result was found in the coefficient of irrigation access. This

coefficient appears to decrease household well-being for those engaged in agricultural

markets. This result is hard to explain, as we would expect that irrigation would be

positively associated with well-being. The lack of access to water in irrigation systems in

the region (noted by many respondents) might explain this negative effect. Most


households that access irrigation do not have enough water, and access to irrigation does

not provide the advantages that it might otherwise.

The selection models were used to estimate the amount of well-being that households

currently engaged in other livelihoods might receive if they selected a different

livelihood. For example, what level of wellbeing would be attained by households

currently engaged in agricultural markets if they instead engaged in non-farm activities.

Results indicate that most households might achieve higher well-being if they engaged in

non-farm activities. However households that want to engage in this sector require

special skills or assets that are not easy to obtain; thus there are constraining barriers to

diversification in the watershed.

Several policy changes were simulated to determine their impacts on livelihood

choice and household well-being. First a policy change that provides wider education to

households in the region was assumed, with more education livelihood strategy selection

moves towards the non-farm sector and away from agricultural wage work. These

changes generate positive effects on household well-being. The second policy change

was creating wider access to irrigation. This change moves livelihood strategies towards

agricultural production and away from diversification and non-farm activities, and it had

the effect of decreasing household well-being. This was unexpected but it is explained by

the negative coefficient of irrigation access in the well-being model. These two policy

changes were made to variables that are not statistically significant determinants in the

well-being models but were highly significant determinants of livelihood strategies.


The third and final policy was wider access to formal credit. Although credit is not a

variable that affects the selection of livelihood strategies, it has an important effect on

well-being. This policy change generates the highest increment in average well-being.

However even though credit is available, if it is not used for productive purposes, it might

represent an unnecessary cost for the households instead of being beneficial.

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