Income Diversification and Household Well-Being: A Case Study in Rural Areas of Bangladesh

Abstract

Diversification of income is considered as an effective way to increase household wellbeing in the developing countries. However, scant attention has been given on this issue in the context of Bangladesh. Thus, the objective of this study is to present an empirical evidence of the state of income diversification and its impact on households’ wellbeing in the rural areas of Rajshahi district of Bangladesh. To this end a multi-stage random sampling technique is used to select 138 households from the study area. In analyzing the collected data, the Simpson Index of Diversity (SID) is calculated to measure the level of income diversification while household consumption expenditure is used for measuring the level of well-being. Finally, a multiple regression model is employed to determine the factors affecting households’ wellbeing. The findings of the study indicate that the extent of income diversification is very low in the study area and it has positive and significant effect on households’ wellbeing. The obtained results have important policy implications which imply that programs targeted to engage people in other income generating activities would augment their income sources. As measures from the part of the government reducing the rate of interest for private enterprising in the rural sector, development of rural infrastructure and improving information facilities at the rural areas are suggested.