Switch in Livelihood Strategies and Social Capital Have a Role to Play in Deciding Rural Poverty Dynamics: Evidence from Panel Data Analysis from Eastern India

Abstract

Rural households continuously move into and out of poverty due to various factors; and in response to this phenomenon, these rural households adopt several strategies. The purpose of the present paper was to examine the role of livelihood diversification and social capital in the movement of these households into and out of poverty in Eastern rural India. The present study classified households into four poverty groups (called poverty dynamics) based on the panel data gathered from 1353 rural households between 2004–2005 and 2011–2012. The study used the Sustainable Livelihoods Approach (SLA) and the multinomial logit model (MLM) to examine the poverty outcome between 2004–2005 and 2011–2012. As per the data collected, at the state level, 25.26% of households were chronic poor and 37.04% of households ascended out of poverty, while 8.20% of households descended into poverty between 2004–2005 and 2011–2012. Further, it was found out from the SLA that there is a positive relationship between the phenomena of non-farm activities and escaping poverty. The result from the MLM shows that social capital in the form of group membership in different saving schemes and social groups helps to ascend out of poverty.