Assets, activities and income generation in rural Mexico: factoring in social and public capital

Abstract

In recent years, there has been increasing emphasis in the rural development literature on the multiple income-generating activities undertaken by rural households and the importance of assets in determining the capacity to undertake these activities. Controlling for the endogeneity of activity choice and applying Lee's generalisation of Amemiya's two-step estimator to a simultaneous equation model, household returns to assets from multiple activities are explored for the Mexico ejido sector. To incorporate the multiple variables representing social and public capital into the analysis, factor analysis is used. The results indicate that the asset position of the household has a significant effect on household participation in income-generating activities and returns to those activities. Furthermore, the inclusion of measures of social and public capital into the analysis show that these assets play an important role in income-generating activities and that the influence is dependent on the type of social and public capital as well as the particular activity.