The limits of livelihood diversification and sustainable household well-being, evidence from China

Abstract

Diversification of household livelihood activities has become an important pillar of rural development strategies for improving living standards and household well-being (HWB). Yet diversification's relationship with rural development has not been assessed in working landscapes for households that span a range of HWB levels, which has important implications for sustainable rural transitions and resource use. This paper examines the role of livelihood diversification on HWB. We use a novel dataset from northeast China to develop a quantitative index that reflects sustainable livelihoods derived from principles laid out in the Millennium Ecosystem Assessment, which we refer to as an index of sustainable household well-being (SHWB). We assess the role of diversification against other factors that relate to SHWB, and examine non-linearities in these relationships though quantile regression methods. While past work has shown how diversification can improve SHWB outcomes for low-resource communities, here we test the limits of diversification as a household poverty reduction strategy. Our analysis shows that livelihood diversification is associated with improvements in SHWB for households with low and medium levels of wellbeing (<50th percentile in our sample). At higher levels of SHWB, education and income have much greater influence. Our results are robust to alternate measures of well-being and diversification metrics, and have implications for sustainable livelihood policy and improving household well-being. Supporting and encouraging livelihood diversification should play a significant role in poverty reduction strategies for the poorest of households, but with increased levels of market integration and regional development, specialization may be appropriate.