Smallholder farmers' household wealth and livelihood choices in developing countries: A Sri Lankan case study

Smallholder farmers' household asset based wealth indicators purport to show long-run economic well-being. This paper argues that such well-being is contingent on the 'livelihood strategies' of households and specifically focuses on the impact of off-farm income strategies on wealth. Using a sample of 4861 Sri Lankan agricultural households, a set of 'livelihood strategies' was developed from income share data by employing cluster analysis. These 'livelihood strategies' are related to a wealth index developed from a principal component analysis using a set of quantile regressions. The results show that the effect of off-farm income on wealth is similar to most other strategies at lower wealth quantiles (poor farmers), but becomes weaker at higher quantiles of wealth.