Shocks, Structural Change, and the Patterns of Income Diversification in Burkina Faso
This paper investigates changes in income diversification patterns for the case of Burkina Faso between 1994 and 2003. Contrary to common beliefs, our empirical analysis shows that rural households are not increasingly diversifying their income portfolios. Beyond insuring against and coping with weather shocks, diversification behaviour reflects structural change. Higher returns to agricultural activities, in particular in the cotton and livestock sectors, appear to be the root cause for less non-agricultural diversification and some of our findings hint at better opportunities in the non-farm sector. Yet, average returns in the non-farm sector appear to remain relatively low and migration increasingly turns into a desperation-led strategy. Overall, structural change seems to be biased in favour of richer households. Regarding responses to droughts, we confirm earlier findings, especially that the poorest households are hit particularly hard being forced to sell livestock, often their only asset.