Mobile phone ownership, income diversification, and household welfare in rural Bangladesh

Mobile phone has been widely adopted in developing countries with potential to enhance opportunities for finding employment and business opportunities which builds resilience of rural livelihoods. Although the effect of mobile phones on income has been studied in the past, the potential to increase income diversification and reduce poverty has not been studied so much. To fill this gap, we investigate the linkage among mobile phone ownership, income diversification, and household welfare, using monetary and non-monetary aspects of poverty. Using instrumental variable approach, we find that mobile phone ownership increases income diversification then reduces the incidence and depth of poverty. It also has significant impact on non-monetary aspects of poverty. Our heterogeneity analysis shows the pro-poor impacts of mobile phone ownership as well as that female-headed households enjoy larger impact of mobile phone ownership on income diversification. Moreover, Gini decomposition of different income sources with propensity score matching indicates that the off-farm income results in an inequality-equalizing effect among the rural households owning mobile phones in Bangladesh, suggesting the income diversification through mobile phone ownership improves the overall welfare of the rural society