Determinants of household activity choice, rural income strategies and diversification - Institutional Constraints to Small Farmer Development in Southern Africa - page 59

P i = β 0 + β i X i + μ i (2)

where:
P i = the dependent variable representing household poverty status;
β 0 = the constant term;
β i = the vector of coefficients;
X i = the vector of explanatory variables;
μ i = the error term.

The above econometric model was used and treated against the potential variables, which
are assumed to affect household poverty status. Potential variables which may influence
household's poverty status were acquired from literature (Barrett et al., 2001; Fan et al.,
2002; Schwarze, 2004). Variables included in the model were age, education, household
size, gender, labour availability, possession of physical assets, social capital, dependency
ratio, land size, and geographical location. β s are the parameters to be estimated giving the
marginal effects of each independent variable on poverty.

The study area, Stutterheim, is situated in the Eastern Cape province of South Africa,
located along the N6 road to East London (Figure 3.1). Approximately sixty kilometres
from King Williams Town, the area was formerly part of the Ciskei Bantustan under the

Figure 3.1. Map of the Amatole District showing Stutterheim, Eastern Cape Province, South Africa.