STAARS-004 Patterns of Labor Productivity and Income Diversification in the Rural Farm and Non-Farm Sectors in Sub-Saharan Africa


This study measures and compares labor productivity in staple crops, high value crops, and non-farm activities and explains the determinants of observed productivity gaps. We first examine labor productivity gaps across sectors using a random effects tobit model to account for the censored structure of the balanced panel data. Then, a seemingly unrelated regression approach is used to estimate the determinants of income shares. Finally, the normalized Herfindahl-Simpson’s diversity indices are calculated to reveal income diversification patterns and a correlated random effects double hurdle choice model is used to explain how labor productivity differentials shape or alter household livelihood strategies across sectors. Labor productivity in non-farm activities in Uganda and Nigeria is, respectively, twelve and three times higher when expressed on a per worker basis but falls to twofold when expressed on a per person-days basis. These findings provide some evidence of an underemployment gap in the farm sector relative to the non-farm sector. Diversification into non-farm activities seems to be negatively affected by higher returns in staple or high value crops, indicating the existence of some tradeoffs to improvements in farm and non-farm labor productivity. Analysis of the Herfindahl-Simpson index shows that in rural areas of Uganda and Nigeria, the poorest and richest households have the most diverse income sources. In Uganda, income diversification seems to be driven primarily by pull factors while in Nigeria on the other hand, push factors appear to have major effects in driving the poorest households to engage in several income activities to improve their livelihoods. --- The paper, "Patterns of labor productivity and income diversification – Empirical evidence from Uganda and Nigeria" is published in the World Development journal available here:


Project leader: Abdoulaye Ibrahim Djido

Project researchers:

Journal publication

Authors Co-Authors Title of paper Title of Economic Review Bibliographic references
Abdoulaye I. Djido Bekele A. Shiferaw Patterns of labor productivity and income diversification–Empirical evidence from Uganda and Nigeria World Development

Volume 105,
May 2018, 
pp. 416-427

Working Papers

No working papers.

Policy Briefs

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Final report

Title Modified Size Comments Recommendations
Patterns of Labor Productivity and Income Diversification in the Rural Farm and Non-Farm Sectors in Sub-Saharan Africa 2018-02-15 2.69MB 0 0
Patterns of Labor Productivity and Income Diversification in the Farm and Non-farm Sectors in Sub-Saharan Africa 2017-04-20 2753.75KB 0 0


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