Livelihood Diversification Analysis

Livelihood diversification analysis studies how rural households spread their activities and income across multiple sources rather than relying on a single occupation or crop. Developed conceptually by Frank Ellis and refined empirically by Christopher Barrett, Thomas Reardon, and Patrick Webb, it combines the enumeration and classification of household income activities with quantitative measures of diversity — the number of income sources, the share of non-farm income, and concentration indices such as the Herfindahl or Simpson index — to characterise livelihood portfolios and distinguish diversification driven by distress from that driven by opportunity.