Rural multidimensional poverty and livelihood mix: A micro level study in Bihar, India

Understanding the livelihood dynamics of rural households is crucial for formulating rural, pro-poor policies. Quite a few studies in the past have explored the impact of several aspects of livelihoods on rural poverty using unidimensional or multidimensional poverty measures, which fail to capture the nuances of rural poverty sufficiently. Identifying the gap in the literature, we explore the dynamics of rural poverty in relation to access to livelihood capitals and livelihood diversification of the rural households in India. We measure the rural poverty using the Rural multidimensional poverty index (RMPI) developed by FAO and OPHI (Oxford Poverty and Human Development Initiative) in 2022, access to livelihood capitals using the Alkire-Foster method and livelihood diversification using the Simpson's Diversification Index (SDI). We examine whether livelihood diversification mediates the relationship between access to livelihood capitals and rural multidimensional poverty, as suggested by the Sustainable Livelihood Framework. Our results show that there is low livelihood diversification and lack of access to livelihood capitals in our study area. We also find that livelihood diversification does not mediate the relationship between access to livelihood capitals and rural multidimensional poverty, but access to livelihood capitals is instrumental for poverty reduction in rural communities.