Rural Economy and Farm Income Diversification in Developing Countries

Farm-level diversification involves adding income-generating activities at the farm household level, including livestock, local non-farm and off-farm pursuits undertaken by farm people. Governments in developing countries have an intense interest in promoting increased output diversification at both the farm and national levels. Cited benefits of farm diversification are high and more stable farm incomes and employment, greater long-term prospects for farm income growth and more environmentally sustainable farming systems. In well-functioning market economies, which in addition to the OECD countries probably include much of Southeast Asia and Latin America, the need for policies specifically to promote change in farm-level output mixes arises primarily because of the existence of prior distortions, such as differential protection of specific crops. Agricultural diversification has mostly been a hot policy issue in Asian rice-growing countries. Indonesia, for example, went from being the world&s;s largest importer of rice to being self-sufficient in the decade ending in the mid-1980s.