One of the crucial debates arises when finding a solution for reducing ruraludpoverty, is how the causes of poverty should be classified into the agriculturaludand non-agricultural economic activities. A strong assumption is that,udagricultural and non-agricultural economic activities could be expected to reduceudpoverty, but it is difficult to determine the economic activities that have a strongudpositive impact on rural poverty reduction. This paper identifies the povertyudcauses of two villages (hereafter, ???desa???) in Indonesia by interviewing 152 cocoaudsmallholder households. We employed a (1) Head Count and Poverty Gap Indicesudfor describing the poverty situation, (2) Factor Analysis for constructingudrepresentative factors for the dimension, (3) Path Analysis for identifying theuddirect and indirect impacts of explanatory variables on household income as audpoverty proxy, and (4) Paired-samples T-Test to evaluate the degree of povertyuddifferences. It was found that; (1) statistically, there is no differentiation in theuddegree of poverty between Desa Compong and Desa Maddenra. However, there isuda differentiation in income structure, meaning that the causes of poverty areuddifferent; (2) the orientation of cocoa production is strong and directly associatedudwith the poverty in Compong, while for coffee, cashew-nut and livestockudproduction are associated with poverty in Maddenra. A major implication ofudthese findings is that encouraging cocoa production in Compong, and coffee,udcashew-nut & livestock production in Maddenra can be strongly expected toudreduce poverty directly, meaning that agricultural economic activity is still theudpioneer to reduce rural poverty directly in the country.
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