Rural Livelihood Diversification Strategies and Household Welfare in Bhutan

This paper analyzes rural livelihood diversification strategies and their impact on household welfare using the Bhutan Living Standard Survey 2012. The multinomial estimation shows that education, asset endowment, labor availability, and sex (male/female) of the household head play a vital role in livelihood diversification into non-agricultural sectors. Propensity score matching estimates illustrate that rural households diversifying outside agriculture have higher income and lower poverty levels compared to households pursuing only farming for their livelihoods. Livelihood diversification into non-farm activities can help reduce poverty levels in the range of 6-9 per cent, suggesting the importance of livelihood diversification in reducing poverty and increasing household income in Bhutan.