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Determinants of household income, income distribution, and poverty situation among rice and coffee farming households in Timor-Leste
Dissertation Abstract:
This study was conducted in Bobonaro and Ermera municipalities of Timor Leste to determine the factors that affect the household income of rice and coffee farmers, examine the income distribution and situation of poverty, and analyze the sensitivity of poverty to decreasing prices. A survey was conducted with 150 rice farmers from Bobonaro and 150 coffee farmers from Ermera.
Mean comparison of income between the poor and non-poor groups of rural households, multiple regression analysis aided by diagnostic and goodness of fit tests, calculation of Gini coefficients, and estimates of poverty headcount, poverty gap, and poverty severity indices were done in the study. At the end is a sensitivity analysis that analyzed the effect of price changes on income of rice farming households in Bobonaro and coffee farming households in Ermera.
The regression analysis reveals that age of household working member, participation in agricultural organization, farm size, and price of rice are significant factors affecting income in rice farming. On the other hand, sex of household head, farm size, price of coffee, and frequency of extension visit significantly affect income of coffee farming households.
As far as inequality is concerned, the calculated Gini coefficients pose that households of rice farmers and coffee farmers did not differ much, with the former notching a Gini ratio of 0.28 and the latter recording 0.01 less. These figures also suggest the existence of relative equality among the sampled rice and coffee households.
The study found out that the proportions of poor rice and coffee farming households living below the poverty line of US$ 1.47 per day are 34% and 44%, respectively. While the poverty gap indices are 0.13 for rice farmers and 0.15 for coffee farmers, the poverty severity indices of the rice and coffee farmers are 0.06 and 0.07, respectively. Although this implies that both groups of farmer-households have relatively low inequality, as a whole, poverty is prevalent among the rice and coffee farmers in Bobonaro and Ermera.
The sensitivity analysis based on changes of the commodity prices revealed that the Bobonaro rice farmers are more sensitive to the prices changes than the Ermera coffee farmers. With a 11% decrease in the price of rice, the poverty headcount index among the Bobonaro farmers will increase by 9%. In contrast, the Ermera coffee farmers are not sensitive to the change in price because the price of coffee seems to remain constant even the simulation of changing price goes up to 27%. If the price of rice will decrease by 27%, the poverty headcount index will increase by 16%. Therefore, the rice farmers are more vulnerable than the coffee farmers in terms of drop in price.
Policy interventions to rural poverty reduction may include promotion of membership in effective agricultural organizations, maximization of land use, advocate for reproductive health, and more income generating opportunities for rice and coffee farm households in Bobonaro and Ermera, respectively.