Diversify Livelihood Risks

In certain circumstances, livelihood diversification can spread risks and increase income streams or assets, but does not always achieve this.

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bangladeshi woman with fish

Livelihood diversification has long been recognized as a risk management strategy and source of resilience. However, it is complex and not always clearly associated with either positive or negative changes in livelihoods. Diversification of activities may be less important than diversification of risk. Context is especially important in shaping both the risk environment and the range of livelihood opportunities open to people to diversify risk.

Approach

Stepping up within agriculture/livestock and buffering risk through agricultural diversification, increasing agricultural trade and income and increasing the ability to build savings and/or buy insurance.

Stepping partially out of agriculture/livestock to engage in livelihoods that have a different risk profile as a complement to agriculture-based livelihoods, either through activities related to agriculture/livestock or through migration to urban labor markets.

Moving out of agriculture/livestock entirely and into livelihoods that have a different risk profile.

Evidence

In Kenya’s Northern drylands, pastoralists who have commercialized their activities have gained greater control over natural resources to ‘step up’ by amassing larger herds, privatizing some key rangeland resources and taking advantage of the growing demand for meat. This allows them to better withstand and recover from drought and other shocks. However, because poorer herders with smaller herds are usually less able to capture private land and market opportunities and withstand recurrent shocks, they are less able to reduce their risk by stepping up or out.

Evidence on "stepping partially out" through migration shows that removing capital constraints to migration can have positive impacts on seasonal hunger and well-being. An experimental study in Bangladesh found that households that were given cash or credit travel subsidies were more likely to migrate and that the migrants saved and carried back about half of what they earned. The families of these migrants consumed more calories per person per day, raised their per capita expenditures, increased protein consumption, and spent more on child education. The same amount of food in the form of food aid would cost five times as much. However, changes in the demand for migrant labor and the long-term social costs of splitting up families for extended periods will influence the ultimate effect of migration on resilience.

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