Abstract:

Accepting income diversity by households is regarded as a crucial step in breaking the vicious cycle of poverty. The study aims to investigate the empirical relationship between household welfare and income diversity. We examine the effects of potential endogeneity brought on by selection bias using instrumental variable static panel model regression. The Uganda National Panel Survey waves were used in the study. The results demonstrate that having a variety of sources of income significantly improves household welfare. The findings further revealed that household welfare is significantly predicted by the household head's education while living in the eastern or northern regions has a negative effect on welfare relative to living in the central region. The methods employed in this research were unable to adequately describe the subjective nature of welfare. Future studies may consider taking a pragmatic approach. The utilization of both primary and secondary data for further research may reveal amazing results. In contrast to past research that only used expenditure as a proxy for welfare, the research study advances the literature on welfare by demonstrating the impact of income diversity on household welfare as measured by poverty status and consumption expenditure. The study extends the welfare theory by showing how diversity of income enhances household welfare using a sample of households in Uganda, a developing economy.