This article explores the degree to which diversification to non-farm activities, productivity improvements for identical crops (in this case coffee) and crop switching (from coffee to cocoa) are driving income dynamics in Central Sulawesi, Indonesia. Using a household panel data set for Central Sulawesi collected in 2001, 2004 and 2006, the authors find that the growth in and level of rural incomes in the post-crisis period can be explained by a common set of factors, including an increase in non-agricultural household incomes, a shift in cropping patterns and more favourable commodity prices for cocoa. While many households derived part of their incomes from non-agricultural activities, significant entrance barriers for poorer households to become engaged in profitable non-agricultural activities remain. Moreover, incomes from agriculture still constitute the financial backbone of rural households. Income growth among poor households can be primarily attributed to increases in agricultural self-employed income while richer households also benefited from strong increases in non-agricultural incomes. The basic income relationships obtained from this study can be found all over rural Indonesia.
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Klasen S., Priebe J. and Rudolf R.
Agricultural Economics 44, 349-364