Farm income, Diversified Income and Welfare of Households: An Empirical Evidence from Uganda

  • Joash R.A Watema Department of Economics and Management, Faculty of Management Sciences, Busitema University, Uganda.
  • Richard K. Siele Department of Economics, School of Business and Economics, Moi University, Eldoret, Kenya
  • Edwin Kimitei Department of Marketing and Logistics, School of Business and Economics, Moi University, Eldoret, Kenya.
Keywords: Farm Income, Diversified Income, Welfare, Instrumental variables, Uganda.


The welfare of households is a central aspect for individuals who live in households and by extension to the entire economy. Household welfare in Sub-Saharan Africa is declining as evidenced by low consumption expenditure as well as increasing poverty levels. This study sought to investigate the effect of farm income, diversified income on household welfare. The study employed panel data from the most recent four waves of Uganda National Panel Surveys. Two proxies for household welfare were utilized in the analysis: household consumption expenditure and household poverty status. The study employed the IV- FE, IV-RE and IV-probit estimation techniques. Results from the study revealed that diversified household income has a significant positive effect on household welfare. However, estimates from all regressions indicate that farm income does not have any significant effect on household welfare. To reduce poverty and thus increase consumption expenditure, households, government, policy makers and other stakeholders ought to prioritize diversified income. 


Adepoju, A. O., & Obayelu, O. A. (2013). Livelihood diversification and welfare of rural households in Ondo State, Nigeria. Journal of Development and Agricultural Economics, 5(12), 482–489.

Aguilar, R. A. C., Eilertsen, A., Fujs, T., Lakner, C., Mahler, D. G., Nguyen, M. C., Schoch, M., Baah, S. K. T., Viveros, M., & Wu, H. (2022). 2022 Global poverty Update From World Bank.

Agyeman, B. A. S., Asuming-Brempong, S. &Onumah, E. E., (2014). Determinants of Income Diversification of Farm Households in the Western Region of Ghana. Quarterly Journal of International Agriculture 53 (2014), No. 1: 55-72.

Amfo, B., Mensah, J. O., Ali, E. B., Dagunga, G., Etuah, S., & Aidoo, R. (2021). Rice farm income diversification in Ghana and implications on household consumption expenditure. International Journal of Social Economics.

Asfaw, S., Antonio Scognamillo, A., Caprera, G. D., Sitko, N. & Ignaciuk, A., (2019). Heterogeneous impact of livelihood diversification on household
welfare: Cross-country evidence from Sub-Saharan Africa. World Development, Vol. 117, pp. 278 – 295.

Asfaw, S., Lipper, L., Dalton, T. J. & Audi, P., (2012). Market participation, on-farm crop diversity and household welfare: micro-evidence from Kenya. Environment and Development Economics, Vol. 17, No. 5, pp. 579 – 601. DOI: 10.1017/S1355770X12000277

Chirwa, C. W., Makoka, D., Maonga, B. B. and Ng’ong’ola, D. H., (2017). Impact of Malawi’s Farm Income Diversification Programme on Household Welfare: Empirical evidence from eleven districts.

Danso-Abbeam, G., Dagunga, G., & Ehiakpor, D. S. (2020). Rural non-farm income diversification: implications on smallholder farmers' welfare and agricultural technology adoption in Ghana. Heliyon, 6(11), e05393.

Du-Pont, T., Vilakazi, C. M. N., Thondhlana, G., & Vedeld, P. (2020). Livestock income and household welfare for communities adjacent to the Great Fish River Nature Reserve, South Africa. Environmental Development, 33, 100508. Doi: 10.1016/j.envdev.2020.100508

Dzanku, F.M. (2018). Rational but poor? An Explanation for Rural Economic Livelihood Strategy. Journal of Agricultural Economics, 69, (2), 365–81.

Eastafrican, (2021, December 1). 29 Million People face Hunger in East Africa. The East African.

Egger, D., Miguel, E., Warren, S. S., Shenoy, A., Collins, E., Karlan, D., Parkerson, D., Mobarak, A. M., Fink, G., Udry, C., Walker, M., Haushofer, J., Larreboure, M., Athey, S., Meriggi, N. F., Wabwire, A., Davis, C. A., Pape, U. J., & Graff, T. (2020). Falling living standards during the COVID-19 crisis : Quantitative evidence from nine developing countries. April.

Ggoobi, R., (2017). “The Paradox of Economic Growth and Unemployment in Uganda.” Unpublished paper presented at the Public Symposium Organized by the Society for Justice and National Unity (SoJNU) in Conjunction with the Leadership Centre, MUBS, August 2017. Kampala, Uganda.

Hong, Y.-Z., Liu, W.-P., & Dai, Y.-W. (2018). Income diversification strategies and household welfare: empirical evidence from forestry farm households in China. Agroforestry Systems, 0.

Kakungulu, M., Isabirye, M., Akoyi, K.T., Hoyweghen, K.V., Liesbet Vranken, L., & Maertens, M. (2021). Changing income portfolios and household welfare in rural Uganda, Agrekon, 60 (3), 227-242.

Kansiime, M. K., Tambo, J. A., Mugambi, I., Bundi, M., Kara, A., & Owuor, C. (2021). COVID-19 implications on household income and food security in Kenya and Uganda: Findings from a rapid assessment. World Development, 137, 105199.

Khan, R., & Morrissey, O. (2020). Income diversification and household welfare in Tanzania 2008-13: WIDER Working Paper.

Loison, S.A. (2019). Household livelihood diversification and gender: panel evidence from rural Kenya. Journal of Rural Studies 69: 156–72.

Ma, W., Zhou, X. & Renwick, A., (2019). Impact of off-farm income on household energy expenditures in China: Implications for rural energy transition. Energy Policy, 127, pp. 248 – 258.

Mahmud, M. and Riley. E., (2021). “Household response to an extreme shock: Evidence on the immediate impact of the Covid-19 lockdown on economic outcomes and well-being in rural Uganda.” World Development, 140, 105318.

Mendoza, A. R. (2018). Is Household Income Diversification Welfare Improving? The Evidence from Philipine Panel Data. The Philippine Review of Economics, LV(1), 128–160.

Möllers, J., & Buchenrieder, G., (2011). Effects of rural non-farm employment on household welfare and income distribution of small farms in Croatia. Quarterly Journal of International Agriculture, 50(892-2016-65199), 217-235.

Mostafa, A. (2021). Middle East and North Africa Humanitarian Situation report.
Nguyen, T. T., Nguyen, T.-T., Hoang, V.-N., Wilson, C., & Managi, S. (2019). Energy transition, poverty and inequality in Vietnam. Energy Policy, 132, 536-548.

Nyikahadzoi, K., Dzingirai, V., Zamayisa, B., Quarshie, E., & Warinda, P. (2019). Incomes, remittances and implications for the welfare of migrant-sending households in Zimbabwe. Migrating Out of Poverty, December.

Omotesho, K. F., Akinrinde, A. F., Ogunlade, I., & Egbugo, J. K. (2020). Effect of income diversification on the livelihood of the rural farming households Kwara State, Nigeria. Kasetsart Journal of Social Sciences, 41, 308–314.

Oyimbo, O., & Olaleye, K. T. (2016). Farm Households Livelihood Diversification and Poverty Alleviation in Giwa Local Government Area of Kaduna State, Nigeria. Consilience, 15(15), 219–232.

Rahut, D. B., Mottaleb, K. A. and Ali, A., (2017). Rural Livelihood Diversification Strategies and Household Welfare in Bhutan. The European Journal of Development Research. Doi:10.1057/s41287-017-0120-5

Rashidin, M., Javed, S., Liu, B. & Jian, W., (2020). Ramifications of Households’ Nonfarm Income on Agricultural Productivity: Evidence from a Rural Area of Pakistan. DOI: 10.1177/2158244020902091.

Regasa, D., Fielding, D., & Roberts, H. (2020). Contestable Credit Markets and Household Welfare : Panel Data Evidence from Ethiopia. The Journal of Development Studies, 00(00), 1–18.

Rememberance H, C., (2015). “A comparative analysis of rural and urban household savings behavior in South.” University of Limpopo.

Ren, Z., Ge, Y., Wang, J., Mao, J., Wang, X. & Zhang, Q., (2017). Understanding the inconsistent relationships between socioeconomic factors and poverty incidence across contiguous
poverty-stricken regions in China: Multilevel modelling. Spatial Statistics.

Seneerattanaprayul, J., & Gan, C. (2021). Effects of agricultural cooperative services on rural household welfare in Thailand. International Social Science Journal.

Severini, S. & Tantari, A., (2013). The effect of the EU farm payments policy and its recent reform on farm income inequality. Journal of Policy Modeling Vol. 35, pp. 212–227.

Stifel, D., (2010). The rural non-farm economy, livelihood strategies and household welfare. AfJARE, Vol. 4 No. 1, pp. 82 – 109.

Tambo, J. A. & Wünscher, T., (2017). Farmer-led innovations and rural household welfare: Evidence from Ghana. Journal of Rural Studies, Vol. 55, pp. 263 – 274.

Uganda Bureau of Statistics (UBOS), (2021). Uganda National Household Survey 2019/2020. Kampala, Uganda; UBOS.

Unnikrishnan, V., & Imai, K. S. (2020). Does the old-age pension scheme improve household welfare? Evidence from India. World Development, 134.

Wambua, S., Nyariki, D. M., Muasya, R., & Warinda, E. (2020). Impact of smallholder farmers’ welfare through participation in on-farm regional projects in East Africa. Agrekon, 59(1), 16-29.

Xu, T. (2017). Income Diversification and Rural Consumption — Evidence from Chinese Provincial Panel Data. Sustainability, 9, 1–14.

Zakaria, A., Azumah, S. B., Akudugu, M. A., & Donkoh, S. A. (2019). Welfare Effects of Livelihood Diversification of Farm Households in Northern Ghana: A Quantitative Approach. UDS International Journal of Development, 6(3), 214–226.

Zhao, J., & Barry, P. J. (2014). Income Diversification of Rural Households in China. Canadian Journal of Agricultural Economics, 62, 307–324.
How to Cite
Watema, J., Siele, R., & Kimitei, E. (2022, November 8). Farm income, Diversified Income and Welfare of Households: An Empirical Evidence from Uganda. African Journal of Education,Science and Technology, 7(2), Pg 154-174.