Household economic diversification: policies to support smallholder agriculture, the rural non-farm economy and casual wage labour

Working and discussion papers
March 2017

This paper explores a menu of policy recommendations that developing country governments can use to think through their policy-making decisions and ensure the poorest people participate in economic growth on good terms, such that they can sustainably escape poverty.

Key messages

  • Pro-poorest growth requires additional policy priorities to those advanced by inclusive growth or shared prosperity agendas.
  • State support for smallholder agriculture is vital but not the whole story: to achieve pro-poorest outcomes, it needs to be complemented by balanced rural development characterised by strong policy concerns for the non-farm rural economy, and for rural (including agricultural) wage labour.
  • The poorest can benefit most from increased wage employment opportunities, which can be achieved by small and medium enterprise development. They can also benefit from self-employment, but this is developmentally more difficult and requires a strong combination of asset and cash transfers, financial inclusion and access to business development services.
  • Creating more jobs is vital, but for the poorest so is raising minimum casual wage levels to match increasing living costs and improving working conditions.
  • In low-income countries, social protection can be the major way to support wage levels and tackle the poverty gap.