How Livelihood Assets Contribute to Sustainable Development of Smallholder Farmers

AbstractThere is a knowledge gap and practical demand to understand the relationship between capitals for developing sustainable livelihoods to realize poverty reduction and sustainable development, in particular for the smallholder farmers. This paper intends to make sights into an important livelihood challenge faced by smallholder farmers, which also aims to find out strategy (ies) in accelerating smallholder farmers' poverty reduction and achieving sustainable development. More specifically, we used a hybrid approach by adopting both qualitative and quantitative methods along with the concept of sustainable livelihood approach to reveal six capitals of farmers' household capacity and their potential relationships. Based on an analysis of Grounded Theory for smallholder farmers, we proposed a newly built framework for smallholder farmers' sustainable livelihoods by taking the Psychological capital (Psycap) into the sustainable livelihoods' assets. With a total sample of 796 households representing 26 counties in Three Gorges Reservoir Region (TGRR) in China, we adopted the Structural Equation Modelling using partial least squares (PLS‐SEM) to explore the key factors and key paths affecting smallholder farmers' sustainable livelihoods. Results indicate that Psycap can effectively promote the performance of Human capital (Humcap) and Physical capital (Phycap), with both significant direct and significant indirect effects on sustainable livelihoods; Phycap and Humcap have significant impacts on the new sustainable livelihood index. Finally, this paper proposed corresponding policy recommendations for poverty alleviation and sustainable livelihoods of smallholder farmers. © 2020 John Wiley & Sons, Ltd.