The application of principal component analysis for this purpose was described in
detail by Zeller et al. (2006). This index presents households’ scores based on the
first principal component extracted, which follows a standard normal distribution.
Using this index, we created wealth terciles, that is, groups representing the poorest,
averagely wealthy and wealthiest thirds of the sample households. Eleven
indicators related to household asset endowments, housing conditions, demography
and consumption expenditures
4 in 2007, as well as the official poverty classification
in 2006,
5 were entered into our relative poverty index. Hence, the households’
scores on this factor were used as the relative poverty index on which the classification of households into wealth terciles for some of the following analyses was
based. When compared to an absolute poverty classification, this second relative
measure also contained long-term poverty indicators and thus captures in greater
detail the structural dimension of poverty. Moreover, the use of wealth terciles
helped achieve a greater level of differentiation among the large, heterogeneous
group of households that live above the official rural poverty line in the area.
5.3.3 Poverty and Access to Capital
Institutions, or the formal and informal rules that regulate human relationships in an
economy, are acknowledged as playing an essential role in the povertyenvironment nexus, as they define the incentive structure used and regulate farmers’
access to important resources. We focus here on credit and property rights
institutions, which play an important role in the agriculture-poverty-environment
nexus by enabling or fostering long-term planning, and by improving livelihoods.
5.3.3.1 Credit Institutions
Rural financial markets, and credit markets in particular, play a critical role in the
agricultural sector and in the management of natural resources, as they enable
farmers to make intertemporal decisions (Zeller and Sharma 2000). Farmers
demand credit to buy inputs, but also to smooth their consumption within and
across years, and to cope with risk and uncertainty, so the functioning of credit
markets has several implications for natural resource management. First, many soil
4 The particular asset related indicators entered into the index were: the logged values of TV sets,
cupboards, living room furniture, motorbikes, plus cattle and buffaloes, and housing conditions –
using dummy variables related to access to electricity and floor and wall materials, and the share of
children in the household – which together were used as an indicator of household demographics.
Per-capita consumption expenditure was measured using the LSMS methodology, as described
above.
5 Once a year, the local government classifies households into poor (below the official rural
poverty line) and non-poor, based on a set of criteria developed by MOLISA.
5 Linkages Between Agriculture, Poverty and Natural Resource Use. . .
181
detail by Zeller et al. (2006). This index presents households’ scores based on the
first principal component extracted, which follows a standard normal distribution.
Using this index, we created wealth terciles, that is, groups representing the poorest,
averagely wealthy and wealthiest thirds of the sample households. Eleven
indicators related to household asset endowments, housing conditions, demography
and consumption expenditures
4 in 2007, as well as the official poverty classification
in 2006,
5 were entered into our relative poverty index. Hence, the households’
scores on this factor were used as the relative poverty index on which the classification of households into wealth terciles for some of the following analyses was
based. When compared to an absolute poverty classification, this second relative
measure also contained long-term poverty indicators and thus captures in greater
detail the structural dimension of poverty. Moreover, the use of wealth terciles
helped achieve a greater level of differentiation among the large, heterogeneous
group of households that live above the official rural poverty line in the area.
5.3.3 Poverty and Access to Capital
Institutions, or the formal and informal rules that regulate human relationships in an
economy, are acknowledged as playing an essential role in the povertyenvironment nexus, as they define the incentive structure used and regulate farmers’
access to important resources. We focus here on credit and property rights
institutions, which play an important role in the agriculture-poverty-environment
nexus by enabling or fostering long-term planning, and by improving livelihoods.
5.3.3.1 Credit Institutions
Rural financial markets, and credit markets in particular, play a critical role in the
agricultural sector and in the management of natural resources, as they enable
farmers to make intertemporal decisions (Zeller and Sharma 2000). Farmers
demand credit to buy inputs, but also to smooth their consumption within and
across years, and to cope with risk and uncertainty, so the functioning of credit
markets has several implications for natural resource management. First, many soil
4 The particular asset related indicators entered into the index were: the logged values of TV sets,
cupboards, living room furniture, motorbikes, plus cattle and buffaloes, and housing conditions –
using dummy variables related to access to electricity and floor and wall materials, and the share of
children in the household – which together were used as an indicator of household demographics.
Per-capita consumption expenditure was measured using the LSMS methodology, as described
above.
5 Once a year, the local government classifies households into poor (below the official rural
poverty line) and non-poor, based on a set of criteria developed by MOLISA.
5 Linkages Between Agriculture, Poverty and Natural Resource Use. . .
181