Determinants of Livelihood Diversification among Households in Rwanda: the Role of Education, ICT and Urbanization

Rural households in many different contexts have been found to diversify their income
sources allowing them to spread their risks and to smoothen consumption. Generating
diversified incomes for a majority of the rural poor is an essential component of a successful
rural development strategy. This paper identifies the determinants of income diversification
among Rwandan households using unique panel data obtained from the Integrated
Households Living Conditions Surveys of 2011 and 2014. It applies a binary logit panel
model to a representative sample of 3,839 households across Rwanda controlling for latent
household specific factors. It also conducts a Hausman test the results of which show that
the random effect estimates were more efficient than fixed effect estimates (Chi2=20.73 and
Prob>Chi2=0.1891). The results reveal that education, access to ICT and urban areas were
among the most important factors that influenced livelihood diversification given that p
<0.05. We also found that other measures of household specific factors were important (for
example, the age and gender of the household head along with asset endowments). From
these results, it is recommended that professional training, internet access through phones
and wireless and urbanization should be enhanced so as to enable households to diversify
their sources of income and thus improve food security for their family members.