Rural nonfarm activities and agricultural crop production in Nigeria

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.     

The Theory of the Farm Household: An Application to Saskatchewan

A theoretical model is presented which integrates the consumption and production components of the rural household. A theoretically determined system of expenditure equations, derived factor demand equations and an off-farm labor supply equation are estimated using primary data for Saskatchewan farm households. From the empirical results we conclude that if the wage rate can be observed or estimated, the farm household's behavior can be explained empirically in a manner consistent with received theory. Summary and Conclusions A theoretical model integrating the consumption and production sides of the farm household or enterprise is estimated empirically using primary data for Saskatchewan farm households. The farm household was assumed to maximize its utility function subject to farm production and cash flow constraints. The empirical results indicate that the theoretical model can be estimated successfully even when data are sparse. While the coefficients for the expenditure, derived demand, and off-farm labor supply equations are consistent with coefficients from similar equations estimated separately by others, the theoretically more precise integrated approach specifies the simultaneous effect of the variables across equations. From the empirical results and the theoretical considerations it is obvious that the wage rate is a key explanatory variable in the model. The wage rate links the three components of the model–final expenditures, the derived input demands and off-farm labor hours. The wage rate is one determinant of the allocation of the operator's time (although other factors such as the nature of the operation and opportunities to work off-farm dominated in this study), and both the wage rate and the allocation of the time determine the eventual income available to the rural household. In essence, then, the problem of explaining farm household behavior when the household's business enterprise function cannot be separated from its consumption activity is similar to that of traditional models based on the theory of the firm and models of consumer behavior. The only difference is that the wage rate is observable in the traditional models but needs to be estimated as a shadow price in models which seek to explain rural household behavior. As a result, research in this area must start with an explanation of the allocation of (at least) the operator's labor and a measure of the shadow wage rate. If the entire household's allocation of time between on-farm and off-farm labor and leisure is determined, it is possible to treat its consumption and production activities separately. Further research is required to extend the model to explain household labor supply to both the farm and off-farm labor markets.     

Intertemporal analysis of employment decisions on agricultural holdings in Slovenia

The article attempts to quantify determinants influencing the dynamics of employment decisions on agricultural holdings in Slovenia and to test specific aspects of labor reallocation during the transition period by the application of an agricultural household model. Through the use of a 1991–2000 longitudinal data set for 22,055 farm households, quantitative analysis of intertemporal employment decisions by farm holders is carried out using probit techniques. The determinants tested relate to the personal characteristics of farm holders (gender, age, education level, and potential off‐farm income), household characteristics (size, structure), characteristics of the agricultural holding (economic size, labor intensity), and local labor market conditions. The model results generally confirm existing empirical evidence on asymmetrical and irreversible participation of holders on the labor market. Despite intensive restructuring of agriculture and profound changes in the nonfarm labor market in the analyzed period, labor supply of farm holders remains rigid. The mobility of labor supply is lower than expected, which can be attributed to the importance of structural problems constraining intersectoral mobility. Low labor mobility reduces the efficiency of labor allocation on agricultural holdings in Slovenia. Elements of this problem emerge on both supply (e.g., low level of educational and professional attainment of reference persons) and demand sides of the labor market (e.g., unfavorable local labor market conditions). A marked tendency toward maintaining the same employment status is more distinct in the case of holders employed on‐farm only.     

Does human capital raise farm or nonfarm earning more? New insight from a rural Pakistan household panel

This study explores how human capital affects farm household earnings using two tools to refine measurement of human capital effects. First, it employs a two‐sector model to allow the allocation of family labor between farm and nonfarm activities. Second, it accounts for village fixed effects to evaluate whether results from panel data differ meaningfully from a cross‐sectional data analysis with local binary variables. The results show that education has a negligible effect on farm earnings; instead, experience appears to be the principal channel by which human capital affects agricultural performance in a traditional rural setting. Our results also suggest that prior models that fail to separate nonfarm activities spuriously exaggerated the effect of education to the farm sector. In addition, typical cross‐sectional analyses that ignore fixed effects may cause the effects of education on rural household earnings to be significantly overstated. The fact that panel data regressions accounting for village‐level fixed effects found only one instance of education raising earnings—the effect of literacy on nonfarm income—suggests that considerable heterogeneity may have been ignored in cross‐sectional data analyses, especially ones that omitted village‐level effects.     

Nonfarm employment,agricultural intensification,and productivity change: empirical findings from Uganda

This article uses panel data from the Living Standards Measurement Study‐Integrated Surveys on Agriculture for Uganda to assess the farm‐level effects of nonfarm 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 nonfarm income. Results show that nonfarm employment can have differential impacts on farm technology intensity and productivity. Nonfarm 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 nonfarm income increases. Taken together, our findings reveal important trade‐offs between nonfarm employment and income and farm productivity growth under smallholder agriculture. The results indicated that targeted policies are required to reduce these potential trade‐offs between nonfarm employment and agricultural intensification and productivity change.     

How does land fragmentation affect off‐farm labor supply: panel data evidence from China

This article provides a deeper theoretical understanding of the linkages between land fragmentation and off‐farm labor supply in China, and investigates this relationship empirically in a more direct way than does the existing literature. Drawing upon a rural household panel data set collected in Zhejiang, Hubei, and Yunnan Provinces from 1995 to 2002, we estimate the effects in two steps. First, we estimate the effect of land fragmentation on labor productivity. Second, we estimate the effect of land fragmentation on off‐farm labor supply. The production function results show that land fragmentation indeed leads to lower agricultural labor productivity, implying that land consolidation will make on‐farm work more attractive and thus decrease off‐farm labor supply. However, the effect of land consolidation on off‐farm labor supply is not significant. One likely explanation for this result may be the potentially imperfect labor markets.     

Household-level effects of China's Sloping Land Conversion Program under price and policy shifts

This study examined how agricultural households involved in China's Sloping Land Conversion Program (SLCP) could respond to expected changes in environmental and livestock policies and changing commodity prices. We calibrated a farm household model using 2009 survey data collected in northeast Gansu Province, China, and examined the responses of four different household groups. Household groups were distinguished based on the resources they possessed for either cropping, livestock husbandry or off-farm employment. We also calculated the opportunity cost of converting sloping land from grain crop production to perennial grass production and included the net value of the replacement crop in these calculations. Our model simulations indicated that subsistence-oriented households were most likely to participate in the SLCP, and that SLCP payment reductions could have large negative income effects for this group. Reductions in SLCP payments increased income inequality among households in the study area. Migration- and cropping-oriented households have fewer incentives to participate in the SLCP. With rising commodity prices, SLCP payments need to rise to avoid that subsistence-oriented households reconvert their land from perennial grasses to annual grain crops. Local government policies related to livestock production are being devised in Gansu as a method to lift incomes, and these policies could also have positive environmental benefits by increasing grass production on sloping land. The introduction of these livestock promotion policies had modest income effects but did not alter the area grown with grasses under the SLCP.     

The impact of migration on rural poverty and inequality: a case study in China

Large numbers of agricultural labor moved from the countryside to cities after the economic reforms in China. Migration and remittances play an important role in transforming the structure of rural household income. This article examines the impact of rural‐to‐urban migration on rural poverty and inequality in a mountainous area of Hubei province using the data of a 2002 household survey. Since migration income is a potential substitute for farm income, we present counterfactual scenarios of what rural income, poverty, and inequality would have been in the absence of migration. Our results show that, by providing alternatives to households with lower marginal labor productivity in agriculture, migration leads to an increase in rural income. In contrast to many studies that suggest that the increasing share of nonfarm income in total income widens inequality, this article offers support for the hypothesis that migration tends to have egalitarian effects on rural income for three reasons: (1) migration is rational self‐selection—farmers with higher expected return in agricultural activities and/or in local nonfarm activities choose to remain in the countryside while those with higher expected return in urban nonfarm sectors migrate; (2) households facing binding constraints of land supply are more likely to migrate; (3) poorer households benefit disproportionately from migration.     

A System Comparison Approach to Distinguish Two Nonseparable and Nonnested Agricultural Household Models

This study distinguishes two nonseparable agricultural household models for a self-employed farm household. One assumes heterogeneity of farm and nonfarm labor and a competitive market for nonfarm labor. The other assumes homogeneity of the two types of labor and a restricted market for nonfarm labor. We compare demand systems that are derived from them, which have different dependent variables and different numbers of equations. We apply a Cox-type test to compare these complicated nonnested systems. Results show clearly that the former is better for Japanese rice-farming households. Comparison of price elasticities for those models verifies the importance of that test.     

Land rental markets and labor productivity: Evidence from rural China

This study investigates the impact of the land rental market on labor productivity in rural China. Particular attention is given to farm and nonfarm labor productivity. Using 2012 household‐level data and a multinomial endogenous switching treatment regression technique, we find that rural households renting in farmland increased labor productivity in the farm sector by about 55%, whereas labor productivity in the nonfarm sector decreased by about 6%. We also find that rural households renting out farmland had lower labor productivity in both the farm and nonfarm sectors by 13% and 9%, respectively. More family labor transferred from the farm to the nonfarm sector after renting out land.     

How has microcredit supported agriculture? Evidence using panel data from Bangladesh

Improving agricultural productivity has received a greater attention in recent years amid concerns about rising food insecurity, population pressures, and climate change. Many believe that better access to institutional credit, spanning microcredit as well as commercial and agricultural banks, can help rural households smooth risks, and access inputs and other technology to modernize agriculture and improve farm/nonfarm linkages. We use recently augmented household panel data spanning over 20 years in Bangladesh to examine the effects of rural credit expansion (both microcredit and formal bank channels) on outcomes for agricultural households. We find that microcredit has benefited households with lower landownings, raising agricultural income from activities such as livestock rearing that require less land, as well as nonfarm income diversification for all households, but with the strongest effect for landless or near‐landless households. We do not find effects of microcredit on crop income, but do, however, find that reported supply‐side credit constraints significantly lower crop income. Borrowing by both men and women has contributed to nonfarm income growth for marginal farmers, but only men's borrowing has contributed to nonfarm income growth among higher landowning groups.     

Estimating labor supply of farm households under nonseparability: empirical evidence from Nepal

This paper examines the labor supply of farm households in Nepal using a recently developed methodology that accounts for the simultaneity between production and consumption decisions of the households. Estimates of marginal products of male and female labor or shadow wages are obtained from an agricultural production function. An instrumental variable approach is then used to recover the household's structural labor supply from variations in the shadow wages and income, as well as other household characteristics. The findings reveal that both male and female total labor supply are sensitive to changes in shadow wages and income. Human capital embodied in education is found to exert a significant positive effect on output, but has no statistically significant impact on total labor supply of individuals. The results also rejects the existence of efficient labor markets in rural Nepal.     

Nonf arm Labor Market Participation of Farm Women

Structural changes in Saskatchewan agriculture have led to significant changes in the time allocation of labor of farm women. This paper analyzes the nonfarm labor market participation and labor supply of farm women in the theoretical context of a household production function and contrasts them with those of men. Participation is analyzed using probit models, and nonfarm labor supply functions are estimated using tobit models. Personal characteristics such as age, education, number of children and nonfarm labor participation of the spouse are significantly related to the nonfarm labor market participation and labor supply of farm women, and the direction of influence is as expected. Farm characteristics such as farm size and type are significant in the case of males but not for females. Labor market characteristics are represented only by distance to the nearest center of Complete Shopping Center status or higher and, while this variable is negatively significant for males as expected, it is not significant for females Les changements structurels qui on frappé l'agriculture de la Saskatchewan ont entraîné des modifications significatives à la répartition du temps des agricultrices en matière de travail. L'article présente une analyse de la participation au marché du travail non agricole, ainsi que de l'offre de main-d'oeuvre des agricultrices, dans le contexte théorique d'une fonction de production de ménage, en comparaison avec la situation observée chez les hommes. Le degré de participation e'tait analysé à partir de modèles probit et les fonctions d'offre de main-d'oeuvre non agricole étaient estimées à partir de modéles tobit. Les caractères personnels comme l'âge, I'instruction, le nombre d'enfants et la participation du conjoint à un travail non agricole étaient significativement reliés, dans le sens attendu, à la participation des femmes au marché du travail non agricole et au temps qu'elles pouvaient y consacrer. Les caractères de l'exploitation, superficie et type, n'étaient significatifs que pour les hommes mais pas pour les femmes. Le seul caractére du marché de main-d'oeuvre considéré était la distance entre la ferme et l'agglomération la plus proche de niveau de centre commercial complet ou de niveau supérieur. Bien que, comme on pouvait s'y attendre, cette variable était significativement négative dans le cas des hommes, elle n'avait pas de valeur significative pour les femmes     

The increasing importance of nonfarm income and the changing use of labor and capital in rice farming: the case of Central Luzon, 1979–2003

There have been sharp increases in nonfarm income among farm households in Central Luzon for the last few decades. This study attempts to identify the effects of the increasing nonfarm income on the use of tractors and threshers and on the employment of hired labor as a substitute for family labor. We found that while the increased nonfarm income positively affects the ownership of tractors, it has no significant impact on the use of agricultural machines due presumably to the development of efficient machine rental markets. We also found that the increased nonfarm income leads to the increased use of hired labor, thereby releasing family labor to nonfarm jobs.     

Off-Farm Employment and Grain Marketable Surplus in China

This paper examines the effects of off-farm employment on grain marketable surplus supply during the reform period in China. A theoretical framework demonstrates that farm households' supply behaviour depends not only on the profitability of farm production but also on alternative off-farm wage opportunities of household members. An empirical model, which assumes full income maximisation of farm households, simultaneously evaluates the effects of on-farm and off-farm income on their grain supply behaviour. Particular attention is paid to the effect of off-farm income through a comparison of conditional and unconditional grain marketable surplus supply elasticities. Results show that off-farm income had a strong negative effect on grain marketable surplus from farm households following liberalisation of factor markets in China and that this could lead to a loss of marketable surplus supply.     

Interrelated labor decisions of farm couples: a censored response analysis of off‐farm work

Farm couples' labor market responses are partly the discrete choice of entering the off‐farm labor market and partly the continuous choice of off‐farm working hours, given entry. Such a setting is interesting when examining the increasing occurrence of multiple job‐holdings among farmers in Western economies. Most existing analyses of off‐farm labor supply only model the decisions of the farmer, not the joint decisions of the farm couple. This article presents a framework for handling such interrelated discrete/continuous choices, involving also farm production and household consumption. The derived two‐equation sub‐model for husband/wife's censored labor responses is estimated from a 10‐year Norwegian panel data for 342 farms. The results agree to some extent with earlier studies, but are more informative because of the longer panels—which allows a more extensive examination of latent heterogeneity and behavioral persistence—because it provides cross‐effects in the spouses' labor supplies. The results show some interesting differences between how the independent variables influence the labor supply of operator and spouse. This is most evident for the cross‐effects of education, children, and wage rate. Overall, the results strongly support applying a panel‐censoring model that accounts for latent heterogeneity in this context.     

Income distribution in rice–growing villages during the post-Green Revolution periods: the Philippine case, 1985 and 1998

This paper aims to examine changes in household income sources and its impact on household income distribution in the post‐Green Revolution periods in 1985 and 1998 in the rural Philippines. We found that there has been a structural shift of household income away from farm in favor of nonfarm labor income sources. This finding indicates that rural development is being led by nonfarm sectors. Such a shift has resulted in an increase in household income inequality as the distribution of nonfarm income has become less equal over time and was markedly more unequal than that of farm income in 1998.     

Linkages between the farm and nonfarm sectors at the household level in rural Ghana: a consistent stochastic distance function approach

This article explores the effects within households of an expanding rural nonfarm (RNF) sector in Ghana. We ask whether the growing RNF sector allows for economies of diversification within farms, how it affects household input demands, and whether it has measurable effects in overall household production efficiency. We explore the intrahousehold linkages between agricultural and RNF activities, first assuming perfectly competitive input and output markets and then with market failures, in particular missing labor and credit markets. We then measure these linkages using a household level input distance function, finding high levels of inefficiency in Ghanaian farms. Also, there are cost-complementarities between the RNF sector and the agricultural sector, particularly with food crops in which the poorest tend to specialize. The expansion of the RNF sector increases demand for most inputs including agricultural land. Finally, we show that smaller farms tend to be more efficient, and that RNF output is helping the farm household to become more efficient, but the latter result is not robust.     

Consumption inequality between farm and nonfarm households in Taiwan: a decomposition analysis of differences in distribution

Consumption has been recognized as a more reliable indicator of household well‐being than income. Although a considerable body of literature has examined income inequality between farm and nonfarm households, little is known about inequality in consumption. This research aims to fill this knowledge gap by investigating consumption disparity between farm and nonfarm households. Using a nationally representative household survey from Taiwan, we apply an unconditional quantile regression‐based decomposition method to decompose the differences in the distribution of household expenditure between these farm and nonfarm households. The results indicate that differences in the observed characteristics between these two types of households explain most of the consumption inequality. Moreover, the difference in the education level of the farm operator, household income, and the degree of urbanization are particularly important.     

Off‐farm labor market decisions and agricultural shocks among rural households in Kenya

Using household level data from rural Kenya, this article explores whether and how farm households respond to unfavorable agricultural production environments, including any ex post adjustments in off‐farm labor supply in response to unexpected weather shocks. While controlling for a wide range of educational, demographic, and other locational factors, we examine how long‐term weather conditions and specific rainfall shocks influence a household's decision to engage in, and their earnings from, the off‐farm labor market. We find that rural households engage in off‐farm work as a long‐term strategy to deal with the effects of anticipated weather conditions on their farming operations. The analysis does not reveal major short‐term adjustments in off‐farm engagement as a result of specific, unexpected rainfall shocks; these households do however rely on remittance income and petty agricultural wage labor under these circumstances. Holding other factors constant, and conditional on participation, households in areas with a more productive local agriculture tend to earn more from off‐farm work especially in the informal/business sector than their counterparts in regions with a less productive agriculture. As expected, a vibrant local economy in the form of public investment increases the probability of off‐farm participation.