This research addresses three questions: (i) how have the incidence of poverty and the distribution of income changed? (ii) what factors are associated with rural household income change? and (iii) what factors are associated with moving out of or into poverty in the short-run? The analysis presented is based on a nationally representative twoperiod panel data set from Mozambique, covering the years 2001/2 and 2004/5. We cannot unambiguously argue that poverty headcount in 2005 (a year of more widespread drought) was higher than poverty headcount in 2002, but the poverty gap and squared poverty gap measures were both higher in the second period. Poverty has spatial, demographic, and asset holding dimensions. The diversification of off-farm income sources is strongly associated with increases in household income, and thus poverty reduction. For agricultural activities, especially crop production, reduction in vulnerability to drought is important for poverty reduction. Access to price information is positively correlated with income and poverty reduction in all areas, and the cultivation of tobacco is also significant in reducing poverty in the central part of the country. The impact on poverty of growing tobacco or cotton in the north was not significant, however. We also found that increases in landholding size can reduce poverty in rural Mozambique but will require additional inputs such as labor, fertilizers, and animal traction. DEDICATION To my dad, for his encouragement in pursuing graduate studies. To my son, for his sacrifice during the two years of graduate studies. To my wife, for her love, sacrifice, and support in everything. To my mom and brothers, for their support and love. iii ACKNOWLEDGMENTS

maintains two publication series for research on food security issues. Publications under the Flash series are short (3-4 pages), carefully focused reports designated to provide timely research results on issues of great interest. Publications under the Research Paper series are designed to provide longer, more in-depth treatment of food security issues. The preparation of Flash reports and Research Reports, and their discussion with those who design and influence programs and policies in Mozambique, is an important step in the Directorate’s overall analyses and planning mission. Comments and suggestion from interested users on reports under each of these series help identify additional questions for consideration in later data analyses and report writing, and in the design of further research activities. Users of these reports are encouraged to submit comments and inform us of ongoing information and analysis needs.

Objective 1: To assist MINAG in building institutional capacity to raise smallholder productivity and income through improved technology, markets and policies................. 4 Objective 2: To strengthen IIAM’s capacity to identify and disseminate improved

Objective 1: To assist MINAG in building institutional capacity to raise smallholder productivity and income through improved technology, markets and policies................. 2 Objective 2: To strengthen the capacity of IIAM and MINAG to identify and