Income diversification, poverty traps and policy shocks in Cote d'Ivoire and Kenya

This paper presents evidence on the effects of two different sorts of polic y shocks on observed income diversification patterns in rural Africa. In Co te d'lvoire, households with poor endowments were less able to respond to a ttractive emerging on-farm and non-farm opportunities. Due to entry barrier s to superior livelihood strategies, the benefits of exchange rate reform a ccrued disproportionately to households that were richer prior to devaluati on. By contrast, food-for-work transfers to households in Kenya significant ly reduced liquidity constraints, enabling project participants to pursue m ore lucrative livelihood strategies in nonfarm activities and higher-return agricultural production patterns. Jointly, these two shocks underscore the importance of liquidity, market access and skill constraints to skilled no n-farm income sources to dynamic poverty traps in rural Africa. (C) 2001 El sevier Science Ltd. All rights reserved.