Impact of income diversification on multidimensional poverty: Household level evidence from tea estates in Bangladesh

Abstract

Policy advocates commonly use income diversification strategies worldwide to address economic disturbances such as poverty. Realizing the importance of poverty reduction and the raging debate on whether the household should specialize or diversify their income, this study attempts to investigate the poverty and income diversification nexus in a tea estate of Bangladesh. A multistage sampling procedure was applied to select 1 tea estate and 382 households. Primary data was collected through interview schedule. The Simpson diversification index and Alkire-Foster multidimensional poverty index were used to measure income diversification and multidimensional poverty respectively. Additionally, this paper used the propensity score matching method to assess the causal impact of income diversification on multidimensional poverty. The findings revealed that the research area has a 35% household level income diversity, a 43% household level multidimensional poverty rate, and income diversification has a positive impact on multidimensional poverty reduction. The multidimensional poverty was reduced by 0.095% on average for income diversified households. Therefore, from a policy perspective, income diversification can be a good solution for reducing household-level multidimensional poverty. Government and other stakeholders should redesign working guidelines for tea workers regarding working hour, days and wage in such a way that they can engage in several income-generating activities apart from tea production-related activities in the tea estates.