No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Nonfarm entrepreneurship, crop output, and household welfare in Tanzania: An exploration of transmission channels
Abstract
This study analyzes panel data from the Tanzania Living Standards Measurement Study‐Integrated Surveys on Agriculture by the World Bank to investigate the impact of nonfarm entrepreneurship as a nonfarm activity on the value of crop output and household welfare, and to explore the potential transmission channels among rural farm households. Using a dynamic panel model to address endogeneity, our results reveal that nonfarm entrepreneurship has a positive impact on the value of crop output and household welfare. Our findings suggest that income from nonfarm entrepreneurship may enhance crop output through crop production technology and credit access, and household welfare through an increase in consumption expenditure and food expenditure as potential transmission mechanisms. Policies that enhance nonfarm entrepreneurship may also reinforce crop production and the welfare of farm households and are thus imperative. We suggest that policies that boost nonfarm sector growth such as agro‐processing and agribusiness enterprise development might achieve the twin objectives simultaneously: enhancing crop production and household welfare [EconLit Citations: C33, D24, Q12, 012].
... This is an open access article distributed under the terms of the CC BY 4.0 license. https://creativecommons.org/licenses/by/4.0/ 3 International Food and Agribusiness Management Review overall income of families, and enhance the ability of farmers to pay for technology and resist risks (Barasa et al., 2023). At the same time, off-farm employment will also broaden farmers' information acquisition channels and improve their technical awareness and awareness of agricultural product quality and safety (Addai et al., 2023), thereby promoting farmers' technology adoption. ...
Actively encouraging farmers to adopt green control techniques (GCT) is an important measure for achieving sustainable agricultural development and ensuring global food security. Based on microsurvey data covering 912 households in Henan and Shandong Provinces, this paper uses a binary probit model to explore the effect of off-farm employment on the adoption behavior of farmers’ GCT and the mechanism of the effect. The study finds that off-farm employment has a capacity accumulation (CAP) effect and a crowding-out (CROWD) effect on farmers’ GCT adoption behavior. Additionally, the CROWD effect generally exceeds the CAP effect, making off-farm employment unfavorable for farmers’ adoption of GCT. Further analysis finds that off-farm employment has a positive effect on the adoption of GCT by farmers based on agricultural income, and as the distance from off-farm employment increases, the positive effect is greater. In contrast, off-farm employment has a negative effect on rural households whose main income is nonagricultural income, and with the increase in the distance from off-farm employment, its negative effect gradually increases. On this basis, to promote green prevention and control techniques for diseases and insect pests, we should focus on farmers whose main income is agricultural, enhance their CAP effect, and guide farmers whose main income is nonagricultural to transfer out of their land. While enriching research on GCT, this paper also provides an empirical basis and policy reference for how to better promote GCT during the period of rapid development of off-farm employment.
This study evaluates microcredit outcomes in Uganda, where non‐farm enterprises are critical for complementing farming incomes and diversifying livelihoods. It investigates the effects of microcredit on the performance of non‐farm microenterprises (MEs) run by female small‐holder farmers, using quasi‐experimental cross‐sectional and panel designs. The average loan amount was 280 and $184, respectively. Propensity score matching (PSM) revealed a 24% and 47% increase in funds used to restock and in ME monetary value, respectively, but no differences in ME profits. Difference‐in‐difference analysis (DiD) over 1 year showed improvements in ME monetary value and employee numbers but no effect on profits, trade expenses, or restocking. Across both methods, no improvement in ME profit levels was observed. However, the increase in monetary worth suggests potential profit growth over time. The borrowing context, repayment terms, and the type and size of MEs appeared to limit profitability. This study highlights the importance of understanding microcredit impacts in contexts where non‐farm enterprises are pivotal to rural livelihoods.
Purpose
The farm sector is crucial for rural poverty alleviation, alongside the non-farm sector, which contributes to mitigating risks associated with crop failures. This paper investigates the effects of public policies on productive employment within both the farm and non-farm sectors in sub-Saharan Africa.
Design/methodology/approach
A meta-analysis is conducted exclusively on the results of the Partnership for Economic Policy (PEP)-funded studies under the Policy Analysis on Growth and Employment (PAGE II) initiative. Selected studies focused on the impact of public policies on productive employment in rural farm and non-farm sectors, encompassing a total of nine sub-Saharan Africa countries in: Benin, Burkina Faso, Cote d'Ivoire, Democratic Republic of Congo, Ghana, Lesotho, Nigeria, Senegal and South Africa.
Findings
The results indicate that public investments in rural areas and public policies that facilitate access to productive resources are likely to enhance productive employment. The overall effect size is positive and significant, ranging from 2% to 10% increases in productive employment. Sources of variation include the sector of activity and the policy instrument. In addition, the policy effects are gender-sensitive and seem more consistent in the non-farm sector.
Research limitations/implications
Although the selected working papers addressed several aspects of productive employment, other aspects warrant further investigation. Policies involving restrictions or regulations have received little attention in the impact analysis. Researches to fill this gap would be important. Another suggestion for further research is the analysis of the relative importance of non-farm employment in rural areas in developing countries. It is always assumed that rural households depend heavily on agriculture for their subsistence.
Originality/value
The contribution of the paper lies in the comparative analysis of numerous public policies implemented in nine distinct countries. By consolidating data from fourteen 14 different experiences into a single study, the paper offers valuable insights on factors that determine policy effectiveness and contribute to understanding what worked for whom and why.
Theoretically there are two possible impacts of off-farm employment on agricultural production and productivity. On the one hand, they can enhance farm production by providing the finance needed for farm inputs and technologies and, on the other hand, off-farm activities may have a detrimental effect on farm output by competing farming for labor. The aim of this study is to explore the effect of off-farm employment participation of farm households on agricultural crop output yield and productivity. The data used for this study is collected from four rural kebeles of farm households with the total sample size of 221, and individual household head was selected by applying a multistage sampling technique. Sub districts were selected purposively based on their distance from the nearby town (Wolkite) as well as the type of crops produced, while households were selected randomly from a stratified sample frame. We used OLS and Tobit regressions to analyze the data. The results show that households' engagement in off-farm activities is inversely related to crop production and, to some extent, to land productivity implying that the rural non-farm economy competes with agriculture for labor and that marginal productivity of labor in agriculture is positive.
With ensuring food security becoming a priority for the Chinese government, the prevalence of off-farm employment (OE) may cast a shadow on agricultural productivity. Based on the data of the China Family Panel Studies in 2018, the Tobit model and threshold effect model have been applied to investigate the impact of off-farm employment on agricultural productivity efficiency (APE), measured by data envelopment analysis (DEA). The result has shown that: (1) OE contributes to a low level of APE. (2) Both self-employed off-farm employment (SOE) and wage-based off-farm employment (WOE) result in lower APE levels when endogenous issues are addressed. However, SOE had a greater negative impact on APE than WOE. (3) There exists a threshold for OE associated with a lower level of APE, indicating that the negative effect of OE on APE disappears when the degree of OE is high enough, SOE has a lower threshold than WOE. The study findings have implications for improving agricultural production efficiency in the context of large-scale off-farm employment of Chinese farmers.
While several studies have linked rural welfare with non-farm employment, the available evidence suggests that whether participation in non-farm employment is welfare improving is intrinsically an empirical question. In addition, the existing literature places emphasis on food and total household expenditure such that there is a dearth of evidence as far as the role of non-food expenditure is concerned. Using household survey data from Burkina Faso, this paper shows that the extent of the impact varies with types of non-farm employment and household expenditure. The results show that participation in wage employment does not affect any type of expenditure. Non-farm self-employment during the dry season increases non-food expenditure but has no significant effect on food expenditure. Non-farm self-employment during both dry and cropping seasons, and total non-farm employment are associated with higher food and non-food expenditures, with higher impact on non-food expenditure. The general pattern of the results suggests that smallholder farmers tend to classify agriculture as the primary source of food while incomes from non-farm sources are preferably oriented towards non-food consumption. From a policy perspective, this shows that promoting the rural non-farm economy will improve welfare in the semi-arid areas. Potential areas of interventions include (i) implementation of the minimum guarantee wage scheme to improve earnings from wage employment and, (ii) development of a vibrant rural credit scheme to improve access to non-farm self-employment.
This study examines the effect of non‐farm labour participation on poverty reduction in rural Mauritania. Farm households with more land and livestock participate to a greater extent in non‐farm activities compared with households with smaller land or cattle. We study poverty's relationship with non‐farm labour activities in terms of the incidence as well as the intensity and severity of poverty. The study is the first to highlight the contribution of the non‐agricultural sector in the reduction of poverty in the rural areas of Mauritania. We apply probit, propensity score matching and inverse probability weighting techniques to determine the signs and impacts of participation on poverty reduction. The results show that the probability of being poor is 5.9% lower among households that have at least one member participating in non‐farm activities compared with those only associated with the agriculture sector. Participation in non‐farm activities is associated with lower intensity and severity of poverty (3.6% and 1.9%, respectively). We find that surplus labour released by the agriculture sector is absorbed in the non‐farm economy. Income generation through diversification into non‐farm activities therefore seems to be an effective way to reduce poverty in rural areas.
This study sheds light on the effects of non-farm employment on household food poverty and vulnerability among rural households in Vietnam using data from the Vietnam Household Living Standard Survey of 2010. Vulnerability to food poverty constitutes a certain probability that a non-poor household will become food-poor or that a food-poor household will remain in poverty in future. The results suggest that non-farm employment exerts a positive and statistically significant effect on the reduction in household food poverty and vulnerability. Specifically, participating in non-farm employment will help decrease the probability of falling into food poverty in future by roughly 19%. We also document that 31% of non-food-poor households in rural areas suffered from vulnerability to food poverty, indicating their high probability of falling into food poverty in future. Additional results from regional evaluation suggest that the North-west region of Vietnam is most vulnerable to food poverty and has an urgent need of targeted government development policies; improving access to non-farm employment could help mitigate vulnerability.
This paper focuses on smallholder agriculture and livelihoods in north-central Tanzania. It traces changes in agricultural production and asset ownership in one community over a 28 year period. Over this period, national development policies and agriculture programs have moved from socialism to neo-liberal approaches. Using a combination of qualitative and quantitative methods, we explore how farmers have responded to these shifts in the wider political-economic context and how these responses have shaped their livelihoods and ideas about farming and wealth. This case study clearly debunks the idea that rural farmers are slow to respond to “modern” farming methods or that smallholder farming is stagnant and cannot reduce poverty. While changes overall are very positive in this rural community, challenges remain as land sizes are small and markets often unreliable. This research cautions against a shift in emphasis to large-scale farming as a strategy for national development. It suggests instead that increased investment in supporting smallholder farming is critical for addressing poverty and rural well-being.
Tanzania’s recent growth boom has been accompanied by a threefold increase in the share of the rural labour force working in nonfarm employment. Although households with nonfarm enterprises are less likely to be poor, a substantial fraction of these households fall below the poverty line. Heterogeneity in the labour productivity of rural nonfarm businesses calls for a two-pronged strategy for rural transformation. Relatively unproductive enterprises may be part of a poverty reduction strategy but should not be expected to contribute to employment and labour productivity growth. Failure to account for this heterogeneity is likely to lead to disappointing outcomes.
Agriculture is the mainstay of most African economies and economic performance in these countries is intricately linked to the performance of the agricultural sector. Indeed, in sub-Saharan Africa (SSA), the majority of the population resides in rural areas and the majority of farmers (up to 80%) are smallholders. However, productivity of these smallholder farmers is low compared to other developing regions, and this has perpetuated poverty in rural Africa. Agriculture has the greatest potential to reduce poverty in rural Africa. This special issue looks at efforts to transform agriculture in rural SSA to not only raise incomes of farmers, but to also foster broader structural transformation of African economies. The focus is on what needs to be done from a policy and practical point of view to kick-start, and in some cases, entrench structural transformation of the agricultural sector, taking cognizance of the need to transform across the value chain. Commitment by African governments, through initiatives such as the Comprehensive Africa Agriculture Development Programme, is a starting point. Over and above this, there is need to better understand why smallholder farmers are reluctant to invest in modern agricultural technologies, including use of modern seeds and fertilisers. Further, there are several constraints to be overcome for structural transformation of African agriculture to be a reality. These include: investing in development and diffusion of new and appropriate agricultural technologies; investing in infrastructure, including irrigation; addressing post-harvest challenges that small holder farmers face, etc. To better entrench the impacts, structural transformation in agriculture should happen concurrently with structural transformation of the rest of the economy, thus allowing for better allocation of scarce resources throughout the economy.
This paper examines the implications of productivity improvements in agriculture, industry, and services for global poverty. We find that, in poor countries, increases in agricultural productivity generally have a larger poverty-reduction effect than increases in industry or services. This differential declines as average incomes rise, partly because agriculture becomes smaller as a share of the economy, and partly because agricultural productivity growth becomes less effective in reducing poverty. The source of the poverty-reduction benefits from agricultural productivity growth changes as innovations are more widely adopted-moving from increases in producer returns to reductions in consumer prices.
In an attempt to go beyond the so called “smart” subsidies, Nigeria has embarked on a potentially innovative mobile phone-based input subsidy program that provides fertilizer and improved seed subsidies through electronic vouchers. In this article, we examined the productivity and welfare effects of the program using household-level data from rural Nigeria. The article employed instrumental variable regression approach to control for the potential endogeneity of the input subsidy program. Our results suggest that the program is effective in improving productivity and welfare outcomes of beneficiary smallholders. The size of the estimated effects suggests a large improvement in productivity and welfare outcomes. Moreover, the distributional effects of the program suggest no heterogeneity effects based on gender and farm land size. These results are robust to using alternative measurements of program participation. The benefit–cost ratio of 1.11 suggests that the program is marginally cost-effective. Overall, our results suggest that while improving average productivity is a good outcome for improving food security, improving the distributional outcome of the program by targeting the most disadvantaged groups would maximize the program’s contribution to food security and poverty reduction.
Using survey data from northern Ghana, this study seeks to establish the impact of participation in non-farm work on the vulnerability of resource poor households to food poverty. Vulnerability to food poverty is assessed based on expected future food expenditure of households. The potential endogeneity problem associated with participation in non-farm work by households is overcome using a novel instrumental variable approach. Analysis of the determinants of expected future food expenditure is done using a standard Feasible Generalized Least Squares (FGLS) method. Demographic and socioeconomic variables, location variables, and household facilities are included in the model as control variables. Our study finds that participation in non-farm work significantly increased the future expected food consumption, thereby alleviating the vulnerability of households to food poverty. Our study also confirms that current food poverty and future food poverty, i.e., vulnerability to food poverty, are not independent from each other. Non-farm work plays a crucial role in providing the means to overcome the risk of food poverty in these resource poor households. Policies that promote off-farm income generating activities, such as small businesses and self-employment, as well as the creation and support of businesses that absorb extra labor from the farm, should be encouraged in the study region. Because households in the study region are exposed to above average levels of hunger and food poverty, the study recommends the government of Ghana and development partners to take measures that enhance the resilience of these resource poor households.
We report on the prevalence and patterns of non-farm enterprises in six sub-Saharan African countries, and study their performance in terms of labor productivity, survival and exit, using the World Bank’s Living Standards Measurement Study - Integrated Surveys on Agriculture (LSMS-ISA). Rural households operate enterprises due to both push and pull factors and tend to do so predominantly in easy-to-enter activities, such as sales and trade, rather than in activities that require higher starting costs, such as transport services, or educational investment, such as professional services. Labor productivity differs widely: rural and female-headed enterprises, those located further away from population centers, and businesses that operate intermittently have lower levels of labor productivity compared to urban and male-owned enterprises, or enterprises that operate throughout the year. Finally, rural enterprises exit the market primarily due to a lack of profitability or finance, and due to idiosyncratic shocks.
While the determinants of rural income diversification have been analyzed in various developing countries, the results remain somewhat ambiguous. Likewise, many previous studies failed to consider the impacts of diversification. Hence, more research is needed to understand what conditions lead to what outcomes and to identify appropriate policy responses. Here, we analyze the situation in rural Nigeria based on recent survey data. The majority of households is fairly diversified; 50% of total income is from off-farm sources. Strikingly, richer households tend to be more diversified, suggesting that diversification is not only considered a risk management strategy but also a means to increase overall income. Econometric analysis confirms that the marginal income effect is positive. Yet, due to market imperfections, resource- poor households are constrained in diversifying their income sources. Reducing market failures through infrastructure improvements could enhance their situation, while, at the same time, promoting specialization among the relatively better off.
This study analyses the determinants of off-farm work participation decisions of farm households in Ethiopia. A bivariate probit model is applied to account for the simultaneity of participation decisions of both male and female members of farm households. The results of the analysis show that human capital variables such as health and training on non-farm activities have a positive effect on the off-farm participation decisions of male members of farm households. The education status of the head has no significant impact on the participation decisions of the members of the family as most of the off-farm activities do not require formal education. The availability of credit and transfer income is the other factors that have a positive impact on the decisions of male members to participate in off-farm activities. The effects of family and farm characteristics are also analysed. Finally, policies that aim to increase the off-farm work participation decisions of family members should take into consideration the difference in responses to the various factors that affect the off-farm work decisions of male and female members of farm households.
This paper examines the impact of climatic change on the level of total agricultural production of Sub-Saharan Africa (SSA) and non-Sub-Sahara Africa (NSSA) developing countries. In doing so it uses a new cross-country panel climatic dataset in an agricultural production framework. The results show that climate, measured as changes in country-wide rainfall and temperature, has been a major determinant of agricultural production in SSA. In contrast, NSSA countries appear not to be affected by climate in the same manner. Simulations using the estimates suggest that the detrimental changes in climate since the 1960s can account for a substantial portion of the gap in agricultural production between SSA and the rest of the developing world.
In this paper, we search to link changes in non-farm employment and agricultural mechanization to the emergence of large-scale farming in China. Based on county-level data for the Jiangsu Province from 2002 to 2016, we use spatial panel data techniques to understand how the increase in large-scale farming in one county is explained by changes in employment and mechanization in the county itself as well as by changes in the neighboring counties. Our results confirm the presence of substantial spatial spillover effects. The level to which large-scale farming is present and expanding in one county is positively associated with local non-farm employment and agricultural mechanization levels. A local higher non-farm employment ratio also contributes to an increase in large-scale farms in neighboring counties. Hence, if a local government intends to support large-scale farming, it can bank on the creation of non-farm employment and support agricultural mechanization in the county it governs. Also economic and policy changes in the neighboring counties will induce land use transition when non-farm employment is created.
African agricultural input subsidy programmes (ISPs) have primarily focused on conventional intensification: raising yields through increased use of inorganic fertiliser and improved seeds. Yet the yield effects from maize‐focused ISPs have been smaller than anticipated, due in part to poor maize yield response to inorganic fertiliser resulting from low soil organic matter or pH. Joint use of inorganic fertiliser with complementary soil fertility management practices—for example, organic fertiliser or maize‐legume intercropping—can contribute to more sustainable forms of agricultural intensification, while also improving yield response to inorganic fertiliser and the effectiveness of ISPs. We analyse the effects of Tanzania's ISP from 2008 to 2014, the National Agricultural Input Voucher Scheme (NAIVS), on use of these practices. Results from correlated random effects (CRE) multinomial logit (MNL) models suggest that NAIVS participation is associated with an 8–10 percentage point increase in the probabilities of inorganic fertiliser use alone and of joint use of inorganic fertiliser with organic fertiliser and/or maize‐legume intercropping on consistent maize‐growing households’ maize plots. CRE fractional MNL results suggest similar associations for the proportion of households’ total maize plots area under these practices. These results suggest that, in some cases, NAIVS may have contributed to sustainable intensification of maize production.
Achieving food and nutritional security by all people at all times is a key development goal at the global, regional and national levels. To achieve access to sufficient safe food of acceptable quality at all times, gender mainstreaming in food and nutritional policies, programmes and projects is increasingly being recognized as important to the realization of this goal. In addition, access to well-functioning markets is likely to improve farmers profitability and their access to diverse nutritious foods. This paper avails evidence on the effect of gendered access to organized agricultural markets on household dietary diversity scores in Kenya using nationwide survey data. Using an inverse probability weighted treatment-effect estimator, we evaluate whether improving women’s and men’s access to well-functioning agricultural markets facilitates diet diversity among households. The analysis shows that while improving both women and men’s agricultural commercialization through organised marketing systems improves the dietary diversity outcomes of households, the effect of women is double that of men. However, greater effects are achieved when both the female and male in the same household have access to well-functioning agricultural markets. Further, addressing human and socio-economic needs of households are also important in enhancing households’ dietary diversity quality.
Evidence from the rural livelihood literature shows that farm households in developing countries engage in nonfarm employment to supplement their household income. This raises the question of whether nonfarm income complements or competes with agricultural production due to a possible shift in farm household labour to nonfarm employment. Using survey data, this study examines the impact of rural nonfarm income on farm households’ agricultural production in Bangladesh. Applying the instrumental variable Tobit model, we find a nonlinear relationship between nonfarm income and total production expenditure as well as expenditures on major purchased inputs (equipment, seed, fertilizer, purchased labour). This indicates that when nonfarm income rises, production expenditure increases but at a decreasing rate. Furthermore, the endogenous stochastic frontier production model indicates that technical inefficiency in agricultural production decreases at an increasing rate when nonfarm income rises. Overall, the findings of this study suggest that nonfarm income exerts an income effect on agricultural production by reducing the liquidity constraint and intensifying major purchased inputs. Thus, introducing policies that would increase rural nonfarm income opportunities to rural households complements agricultural production. This would also lead to raised food production, ultimately leading to an increase in food availability as well as food security.
A substantial acceleration in improving nutrition is required to eradicate malnutrition by 2030. Income growth and increased labor productivity are key to realize this, but some income sources and employment sectors might be more effective in reducing malnutrition than others. We investigate the link between income and nutrition in rural Tanzania, using two rounds of the Tanzania National Panel Survey. We use both monetary and non-monetary measures of food consumption, and analyze besides caloric intake also the intake of important micronutrients, such as iron, zinc and vitamin A, and nutrient deficiencies. We compare income by employment sectors and by gender of the earner. We find that income growth is important for improving household nutrition, both in terms of food quantity and quality. We find that a higher share of income from agricultural self-employment as well as jointly earned income is strongly correlated with caloric and micronutrient intake across households. We do not find evidence to support the assertion that a higher share of income earned solely by women is associated with improved nutrition. Our results imply that closing the labor productivity gap between agriculture and rural non-farm sectors, and raising rural incomes from within agriculture, is a more effective strategy to improve nutrition in rural Tanzania than diversifying income away from agriculture.
In Malawi, maize is the major crop and food staple. Given limited off‐farm employment opportunities, much‐needed increases in household income for improving food security must come from gains in agricultural productivity through better technology and more profitable crops. In the past, hybrid maize and more recently, tobacco were promoted by policy for increasing smallholder income. An analysis of determinants of adoption of these two crops and related income effects is presented. Apart from factor endowment and exposure to agroecological risks, differences in the household's access to financial and commodity markets significantly influence its cropping shares and farm income.
JEL codes: J16 J21 O12 Keywords: Off-farm employment Wage employment Non-farm self-employment Labor mobility Gender Sub-Saharan Africa a b s t r a c t Off-farm income constitutes a substantial share of the household livelihood portfolios across Sub-Saharan Africa. Yet, the determinants and dynamics of individuals' participation in off-farm employment activities have not received adequate attention due to the weaknesses in individual-level data collection and the lack of longitudinal studies. This paper uses national panel household survey data from Ethiopia, Malawi, Nigeria, Tanzania and Uganda; provides empirical evidence on individual-level off-farm (wage and self) employment participation rates; analyzes the extent and drivers of entry into off-farm employment and continued employment; and conducts the analysis by gender and rural/urban location. A non-negligible share of the rural and urban working-age individual population is found to participate in off-farm employment, ranging at the national-level from 34 percent in Ethiopia to 58 percent in Malawi. Men participate in wage and self-employment to a significantly greater extent compared to women across time as well as within and across countries, apart from women's participation in non-farm enterprises being more common in Nigeria and Tanzania. The population weighted crosscountry gender difference in off-farm employment stands at 9 percentage points, but this has declined over time in most countries. A substantial share of the population, amounting to about 39 million individuals across the five countries, is estimated to have entered and exited employment between 2010 and 2016, pointing to the dynamic nature of off-farm employment. Drivers of entry into off-farm employment and continued employment are country-and gender-specific, with demographic factors, occurrence of shocks and job characteristics emerging as the most important determinants.
This study has analysed the dynamics of rural non-farm enterprises and their role in employment provision, equity enhancement and poverty alleviation in Pakistan. Multiple data sources have been used including cross-sectional and panel datasets. The results show that majority of the rural non-farm enterprises in Pakistan are micro-enterprises with only a limited share in manufacturing. They are informal and have poor forward and backward linkages and high closure rate. Despite the poor asset base, they are providing jobs to more than half of the rural population, contributing to reduction in poverty and equity enhancement among the rural masses. Rich households own enterprises and poor households gain employment from non-farm enterprises. Non-farm economy has a significant impact in reducing multiple deprivations and also has a significant positive impact in pulling households out of poverty with the passage of time. Pakistan, being a country where most of the population is still residing in rural areas and where rural land is not equitably distributed; such non-farm activities are highly important not only to tackle the ongoing food security challenges but also for resource diversification of households. JEL Classification: I32, J21, J43, O14, Q10, R11 Keywords: Rural Development, Non-farm Sector, Employment, Poverty, Multidimensional Poverty
The objective of this study is to analyze the decision to work off-farm by male and female farmers in Nicaragua using a three-year unbalanced panel dataset. Shadow income and shadow wages are also estimated. Moreover, to mitigate biases from unobserved individual and farm time-invariant characteristics as well as from sample selection, we apply a semiparametric approach for panel data. Our main findings suggest that shadow wages play a major role in off-farm labor decisions for both males and females. This implies that less labor is allocated to off-farm activities as the opportunity cost for agricultural work goes up. In addition, as the on-farm marginal productivity of households (i.e., shadow income) rises, both males and females reduce the hours they allocate to off-farm activities.
Using the LSMS-ISA Tanzania National Panel Survey by the World Bank, we study the relationship between rural household consumption growth and temperature shocks over the period 2008–2013.
Temperature shocks have a negative and significant impact on household growth if their initial consumption lies below a critical threshold. As such, temperature shocks slow income convergence among households, at least in the short run. Crop yields and total factor productivity in agriculture are the main transmission channels. Extrapolating from short-term elasticities to long-run phenomena, these findings support the Schelling Conjecture: economic development would help poor farming households to reduce
the impacts of climate change. Hence, closing the yield gap, modernizing agriculture and favouring the structural transformation of the economy are all crucial issues for adaptation of farmers to the negative effects of global warming.
This paper uses panel data from the Living Standards Measurement Study - Integrated Surveys on Agriculture (LSMS-ISA) for Uganda to assess the farm-level effects of non-farm employment on agricultural intensification and productivity change. A sample selection model is used to account for both unobserved heterogeneity and potential simultaneity between agricultural production and non-farm income. Results show that non-farm employment can have differential impacts on farm technology intensity and productivity. Non-farm income is found to have a positive impact on farm hired labor and improved seed intensity; a negative effect on on-farm family labor use; and no significant impact on fertilizer, soil water management, and joint use of farm technologies. The econometric evidence also indicates that agricultural productivity declines as non-farm income increases. Taken together, our findings reveal important tradeoffs between non-farm employment and income and farm productivity growth under smallholder agriculture. The results indicated that targeted policies are required to reduce these potential tradeoffs between non-farm employment and agricultural intensification and productivity change.
This paper examines the role of remittances in the livelihoods of households in developing countries. Previous studies have shown that remittances are mostly utilized for investment in estates, agricultural inputs or education; however, remittances may also be useful for smoothing consumption by poor rural households. Hence, we estimated the differences in consumption patterns for macronutrients and micronutrients between remittance recipients and non-recipients using data from Kilimanjaro, Tanzania. An instrumental variable strategy was adopted in econometric estimations of nutrient consumption to address issues of self-selection and endogeneity of net income and remittances. Furthermore, the instrumental variable quantile regression method was used to estimate the distributional effects of remittances. A major finding was that remittances increased investment in intake of nutrients such as proteins, vitamin A, vitamin C and calcium; these are nutrients that are vitally important for physical development of children and for improving the health of adults. Remittances did not have a significant effect on consumption of macronutrients such as carbohydrates and fats, or total calories.
The potential importance of nonfarm employment for the welfare of rural households has long been recognized, but whether the
nonfarm sector offers prospects for improving the welfare of the rural poor remains a contentious issue. We examine distributional
and well-being effects of nonfarm employment of rural households in the Himalayas. We account for heterogeneity of nonfarm
employment, and estimate a system of structural equations to better understand the causal linkages between nonfarm employment
and household well-being. The results confirm that disaggregating nonfarm employment activities matters for understanding
the relationship between nonfarm employment and rural welfare. While low-return nonfarm employment is associated with lower
income inequality, high-return nonfarm activities have a disequalizing effect on the distribution of household incomes. We
also find that the ability to engage in high-return nonfarm activities is associated with higher economic well-being. Poor
households, on the other hand, tend to rely on low-return activities that do not contribute to improved well-being.
This study examines the effects of off-farm income on food expenditures of rural Bangladeshi households. Our analysis yields unbiased estimates of the unconditional impact of off-farm income on food expenditures and reveals the heterogeneous effects that occur across the distribution of total food consumption expenditures. The findings suggest that the impacts of off-farm income are uniformly positive across the unconditional quantile regression and significantly increase food consumption expenditures for all quantiles, except for the 25th quantile. In addition, we found that schooling, experience, and location of the household increase the food expenditures of rural households. Most importantly, this article argues that female-headed rural households in which the female works off the farm tend to have significantly lower food expenditures.
This paper examines heterogeneous impacts of gendered household headship and control of resources on food security in rural Tanzania (as measured by a World Food Programme score based on quantity and quality of food consumed in the household over a 7 day period). Analysis with minimal attention to heterogeneity in gender considerations indicates no differences in household food security between male and female-headed households. But with a more differentiated household headship variable (reflecting heterogeneity in household composition) and accounting for gendered differences in resource ownership, the results differ markedly. Using more gender-disaggregated variables, our results show significant differences between female-headed and male-headed households. In these results we find support for the claim that gender norms in the study villages often restrict women’s access to resources, resulting in more vulnerable female-headed households. Female-headed households with no male adults present are particularly vulnerable. The study also points to specific opportunities for enhanced food security with attention to female and joint ownership of livestock. These results represent a hopeful sign that efforts to enhance female livestock ownership could be a useful strategy to address lower levels of food consumption in these Tanzanian villages.
Although most rural households are involved in the farm sector, the nonfarm sector has grown significantly in recent decades, and its role in rural development has become increasingly important. This article examines the effect of participation in nonfarm activities on crop expenses of farm households in Nigeria. The relationship is modeled using a nonseparable agricultural household model that suggests that participating in nonfarm activities can relax the credit constraints facing farm households and reduce risk thereby helping households improve farm production and smooth consumption over time. The results show that participation in nonfarm activities by Nigerian farmers has a positive and significant effect on crop expenses and in particular on payments for hired labor and inorganic fertilizers. Separate analysis of the six geopolitical zones in Nigeria indicates that it is in the South-South and South-East zones where nonfarm participation appears to induce more hiring of labor. The results support the hypothesis that nonfarm participation helps relax liquidity constraints but suggests how that liquidity is used is zone-specific. In general, the results also indicate that liquidity is used more to pay for inputs into staple production as opposed to cash crops.
Considering family labor and hired labor as heterogeneous inputs, we present a theoretical framework in which the optimal decisions of a farm household on on-farm family and hired labor, off-farm labor supply, and leisure are determined uniquely and endogenously. Focusing on two alternative settings with and without off-farm employment constraints, we show that imperfect substitutability between family labor and hired labor is not critical to the separation of household production and consumption. The validity of the separation proposition is shown to depend crucially on whether or not the availability of off-farm job opportunities is limited. We further examine how changes in external economic conditions and government policies affect the time allocation decisions of the household, as well as the composition of household income (i.e., on-farm income and off-farm labor earnings).
Several empirical studies across developing countries document a positive correlation between participation in rural nonfarm employment and households’ wealth or income status. However, the direction of causality is far from obvious. This paper explores whether nonfarm employment leads to higher consumption expenditure growth in Ethiopia. We find that; 1) Households’ consumption expenditure growth is positively correlated with the initial share of nonfarm income. 2) The growth elasticity of nonfarm income share is higher for wealthier households; and 3) the source of growth for nonfarm participants lies in the higher rates of return participants enjoy on their human and physical capital.
Using an integrated household model with endogenous transaction costs, this article illustrates how, even in the absence of risk, the tension between gains from specialisation and corresponding increases in transaction costs may lead to enterprise diversification on small farms. A numerical example illustrates that this tension may contribute to the prevalence of inter-cropped cash-crops on small farms, in apparent disregard for foregone yield and income from greater specialisation involving pure-stands. By implication, measures that augment households' abilities to override trading costs may be critical complements to efforts seeking to raise productivity and incomes in small-scale agriculture via increased specialisation.
Abstract This article investigates the differences in yield production, production efficiency, and yield risk for farmers both with and without off-farm work. Using a nationwide survey of rice farmers in Taiwan, we estimate two stochastic production frontier models that accommodate technical inefficiency and production risk simultaneously for farmers both with and without off-farm work. The stochastic dominance criterion is then applied to compare the differences in the distributions of the estimated technical efficiency and yield risk between groups. The empirical results indicate that these two groups of farmers use resources in different ways, and off-farm work is not necessarily associated with lower technical efficiency. For farmers in the lower percentiles of the efficiency distribution, those with off-farm work are more efficient than their counterparts without off-farm work. In addition, farmers with off-farm work face higher production risk and this result is robust for the entire distribution.
This article develops a framework for efficient IV estimators of random effects models with information in levels which can accommodate predetermined variables. Our formulation clarifies the relationship between the existing estimators and the role of transformations in panel data models. We characterize the valid transformations for relevant models and show that optimal estimators are invariant to the transformation used to remove individual effects. We present an alternative transformation for models with predetermined instruments which preserves the orthogonality among the errors. Finally, we consider models with predetermined variables that have constant correlation with the effects and illustrate their importance with simulations.
document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Asset, activity and income diversification lie at the heart of livelihood strategies in rural Africa. This paper introduces a special issue on the topic “Income Diversification and Livelihoods in Rural Africa: Cause and Consequence of Change. ” We concentrate on core conceptual issues that bedevil the literature on rural income diversification and the policy implications of the empirical evidence presented in this special issue.
Policy makers have high expectations for the rural non-farm economy (RNFE). Given high income shares, growing employment, and frequently low capital requirements, they see the RNFE as a potential pathway out of poverty for their rural poor. Yet available evidence suggests that pro-poor rural non-farm growth does not occur automatically. For the poor to benefit from rural non-farm growth, policy makers must stimulate buoyant rural economies, with robust non-farm income growth, not simply low-productivity employment. Moreover, the poor must gain access to growing market niches. Fluid labor markets provide one important bridge linking the rural poor to growing non-farm opportunities.
Estimation of the dynamic error components model is considered using two alternative linear estimators that are designed to improve the properties of the standard first-differenced GMM estimator. Both estimators require restrictions on the initial conditions process. Asymptotic efficiency comparisons and Monte Carlo simulations for the simple AR(1) model demonstrate the dramatic improvement in performance of the proposed estimators compared to the usual first-differenced GMM estimator, and compared to non-linear GMM. The importance of these results is illustrated in an application to the estimation of a labour demand model using company panel data.
This paper presents specification tests that are applicable after estimating a dynamic model from panel data by the generalized
method of moments (GMM), and studies the practical performance of these procedures using both generated and real data. Our
GMM estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation
in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables.
We propose a test of serial correlation based on the GMM residuals and compare this with Sargan tests of over-identifying
restrictions and Hausman specification tests.
With few exceptions, most studies of the labor demand and supply decisions of agricultural households in developing countries
have relied on the empirical advantages of separability. Given the questionable nature of some of the assumptions sufficient
for separability, I apply a recent methodology that accounts for the simultaneity between the production and consumption decisions
of a farm household. Using data from rural India, direct estimates of the marginal productivities (shadow wages) of family
male and female labor are derived from a Cobb-Douglas agricultural production function. The estimated shadow wages and income
are then used as regressors in a structural model of labor supply.
Using data from the 2005 Albania Living Standards Measurement Study (ALSMS05) survey, this article analyzes the overall impact of household nonfarm income-generating activities (RIGA) on agricultural expenditures as well as technical efficiency of rural farm households. We also differentiate the impact for subsistence and commercial farmers, who are in the top 25% of the distribution of value of annual agricultural sales. Our results show that on the whole, Albanian rural households utilize their nonfarm earnings not to invest in time-saving, efficiency-increasing technologies, but to move out of crop production. We derive similar findings when we try to estimate the same relation separately for commercial and subsistence farmers. However, for commercial farmers, we find a positive impact of household nonfarm earnings on livestock expenditures. Copyright (c) 2009 International Association of Agricultural Economists.
This article documents a relationship between nonfarm income (primarily earnings and pensions) and agricultural investment in Bulgaria, specifically, expenditures on working capital (variable inputs such as feed, seed, and herbicides) and investment in livestock. Among those with positive spending on farm inputs, the estimated elasticity of these expenditures with respect to nonfarm income is 0.14. Nonfarm income also has an effect on the number of households that purchase farm animals, with an estimated elasticity of 0.35. The use of nonfarm income for farm investment is consistent with the presence of credit constraints, as is the fact that less than one percent of farmers report outstanding debts for agricultural purposes. Yet many farm households take out large unsecured loans for other purposes, primarily to cover consumption expenditures, implying that credit is available, but that farmers prefer not to use borrowed funds to finance agricultural investment. This would suggest that increases in the availability of agricultural credit may have little effect on farm outcomes, whereas increases in nondebt-financed sources of liquidity, such as subsidies or transfers, may better stimulate investment. Copyright (c) 2009 International Association of Agricultural Economists.
Summary By paying particular attention to the local economic context, this paper analyzes the factors that influence rural non-agricultural employment and earnings. The empirical analysis is based on the Brazilian Demographic Census, allowing for disaggregated controls for the local economy. Education stands out as one of the key factors that shape employment outcome and earnings potential. Failure to control for locational effects, however, can lead to biased estimation of the importance of individual and household characteristics. The empirical results show that local market size, distance to population centers, and other proxies for transactions costs play an important role in shaping non-agricultural employment prospects and earnings.
