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.     

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.     

Examining rural income and employment in Bangladesh: A case of structural changes in the rural nonfarm sector in a developing country

This study uncovers some important stylised facts about the structural changes in the rural nonfarm (RNF) economy in Bangladesh for the period 2000–2016 and identifies some broad determinants. Our work uses household-level, secondary sources such as Household Income and Expenditure Survey, Labour Force Survey and Bangladesh Integrated Household Survey. We find that the positive relationship between landownership and rural income has become weaker in recent years, indicating the increasing role of nonland inputs in generating rural income. The share of RNF income in total rural income has increased substantially over the years. The increase in nonfarm income is largely driven by the nonfarm wage income of the richer households, indicating adverse distributional consequences. There are also indications for specialisation in nonfarm activities—the share of income from the ‘mixed’ sources of farm and nonfarm has decreased, and the ‘only nonfarm’ source has increased. Households tend to move away from agriculture and specialise in RNF occupations as the education level increases. Our results offer important insights into rural development strategies and contribute to the broader questions of the development discourse on the structural changes in developing countries.     

Income Diversification of Rural Households in China

This article examines how different patterns of farm‐level diversification affect the income levels of rural households in China. Using quantile regression analysis of data from a rural household survey, the empirical results exhibit significant differences in diversification effects across rural income strata and various structural characteristics. Diversification, especially involving nonfarm employment and migration, brings a monetary premium to low‐income rural families and an income discount to high‐income families. The policy implications suggest the encouragement of labor‐intensive enterprises in rural areas and improvement of labor quality through rural education and training programs.     

Enhancing food security through diet quality: The role of nonfarm work in rural India

India has achieved food security at the macro level. However, at the micro level, the country still struggles with extensive problems of food nutrition insecurity. In this paper, we assess the impact of nonfarm income and nonfarm work status (casual and full-time nonfarm work) of operator, spouses, and couples on the diet quality of smallholder households in India. We find that nonfarm income decreases the likelihood of farming household being in the poor-diet quality group by 31% and the medium-diet quality group by 3%. Full-time nonfarm work by operators and spouses decreases the likelihood of farming households being in the poor-diet quality group by 3% and 9%, respectively. Finally, national programs like public food distribution programs increase the probability of rural farming households in the poor-diet quality group. Findings from this study underscore the importance of nonfarm income and full-time nonfarm work in improving diet quality of rural Indian households.     

Participation and returns in rural nonfarm activities: evidence from the Kyrgyz Republic

This article uses two representative household budget surveys from the Kyrgyz Republic to analyze factors influencing participation and returns from different types of nonfarm activities in 2005 and 2006. We use the double hurdle and Heckman models, which allow us to demonstrate that a number of variables has different effects on participation and income from nonfarm activities. For example, residing in remote areas and lack of capital are found to stimulate participation in nonfarm activities, but decrease nonfarm income. Results are robust, but using the Heckman model seems to produce more accurate results for returns to education and gender under the presence of selection bias. Overall, nonfarm activities are found to be most important for the poor, who are pushed out of agriculture due to limited and poor land resources. This indicates that equipping poor households to enable them to move towards better remunerative nonfarm activities should be a priority for Kyrgyz rural policy makers.     

A Comparison of the Economic Well-Being of Farm and Nonfarm Households

This study compares the economic well-being of farm and nonfarm households using data from the Agricultural Resource Management Survey and the Survey of Consumer Finances. Comparisons are made in terms of income and wealth using parametric and nonparametric tests, regression analyses, and inequality measures. The results show that the economic well-being of households differs based on their degree of involvement in business activities and their life-cycle stages. The main conclusion is that the income of rural residence and intermediate farms is comparable to that of wage-earning nonfarm households, while commercial farms are similar in well-being to nonfarm households with businesses.     

Cash crop choice and income dynamics in rural areas: evidence for post‐crisis Indonesia

In this article we investigate the factors affecting levels and growth of incomes in rural Indonesia following the crisis of 1997–1998. In particular, we investigate the relative roles of nonfarm incomes and productivity improvements achieved via changes in crops versus improvements on the same crops on income dynamics. Framing the article in the context of an optimal labor allocation model, relying on unique household panel data from Central Sulawesi, and using advanced panel econometric methods, we find that local innovations related to the adoption and intensification of new cash crop varieties, more specifically the shift from coffee to cocoa production, can explain a substantial part of the observed post‐crisis developments. Causal estimates of the effect of growing cocoa suggest that households were on average able to achieve about 14% higher income levels during the post‐crisis period compared to the planting of other crops, most notably coffee. Also, our results demonstrate the importance of engagement in nonfarm activities for household income growth. Comparative analyses using a nationally representative survey suggest that similar processes are at play in other parts of Indonesia.     

Farm households and nonfarm activities in Ethiopia: does clustering influence entry and exit?

This article examines how clustering affects the entry and exit decisions of farm households into and from nonfarm enterprises in rural Ethiopia. We find that the existence of clusters of microenterprises in the same district increases the likelihood of a rural household to start a nonfarm enterprise. Similarly, clustering of big manufacturing firms in the same zone is found to increase the likelihood of farm households to start a nonfarm enterprise. Nonfarm enterprises operating in clusters are also found to have a lower probability of exit than those operating outside of clusters. The study further investigates the impact of entry and exit into and from nonfarm enterprises on farm household's well‐being using as indicators total household income, the food security status of a household, and the household's ability to raise enough money in case of emergency. Using propensity score matching to account for selection bias, we find that entry into nonfarm enterprises significantly increases household's income and food security status. Exit from nonfarm enterprises, on the other hand, is found to significantly reduce household's income.     

集体林区农户收入不平等状况分析——基于辽宁省林改农户调查数据

根据辽宁省5个县3年农户数据的洛伦兹曲线、基尼系数的结果,判断出调查区农户收入差距在加大。文章运用Shapley值计算调查区农户收入结构对收入不平等状况的影响,结果显示,造成农户收入差距的主要因素是非农工作以及农民的教育水平,林改对农户收入的影响主要是通过对农户造林或是转出行为起作用的结果,林改为农户创造了较为公平的多样的收入渠道。     

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.     

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.     

Is off-farm income reforming the farm? Evidence from Mexico

Does access to off-farm income complement or compete with agricultural production? This article explores the effect of off-farm income on agricultural production activities, using data from the 2003 Mexico National Rural Household Survey. We first discuss the theoretical conditions under which access to off-farm income may influence production in an agricultural household model. Instrumental-variable (IV) estimation methods are then used to test whether agricultural production activities, technologies, and input use differ between households with and without access to off-farm income. We find that off-farm income has a negative effect on agricultural output and the use of family labor on the farm, but a positive impact on the demand for purchased inputs. There is also a slight efficiency gain in households with access to off-farm income. Findings offer insights into how household production evolves as rural households increasingly engage in off-farm income activities.     

Rural nonfarm income and its impact on agriculture: evidence from Albania

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.     

Urbanization and poverty reduction: the role of rural diversification and secondary towns1

A rather unique panel tracking more than 3,300 individuals from households in rural Kagera, Tanzania, during 1991/1994–2010 shows that about one out of two individuals/households who exited poverty did so by transitioning out of agriculture into the rural nonfarm economy or secondary towns. Only one out of seven exited poverty by migrating to the big cities, even though those moving to the city experienced on average faster consumption growth. Further analysis of a much larger cross‐country panel of 51 developing countries cannot reject that rural diversification and secondary town development lead to more inclusive growth patterns than metropolitization. Indications are that this follows because more of the poor find their way to the rural nonfarm economy and secondary towns, than to distant cities. The development discourse would benefit from shifting beyond the rural–urban dichotomy and focusing more instead on how best to urbanize and develop its rural nonfarm economy and secondary towns.     

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.     

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.     

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.     

Contract farming: opportunity cost and trade‐offs

An important literature has established that participation in contract farming leads to higher incomes and has a number of other beneficial effects on the welfare of participating households. Yet no one has looked at the opportunity cost of and the various trade‐offs involved in participating in contract farming. I look at the relationship between participation in contract farming and income from (i) livestock, (ii) labor markets, (iii) nonfarm businesses, and (iv) agricultural sources other than livestock and contract farming and (v) unearned income. Using data from Madagascar, I find that participation in contract farming is associated with a 79% decrease in how much income per capita the average household derives from labor markets and a 47% decrease in how much income per capita it derives from nonfarm businesses, but also with a 51% increase in how much income per capita the average household derives from agricultural sources other than livestock and contract farming, possibly due to technological spillovers. Thus, even though contract farming has been shown to improve welfare in multiple ways in this context, it looks as though those gains come at the cost of an “agricultural involution” on the part of participating households, who seem to turn away from non‐agricultural activities. This has important implications for structural transformation narratives.     

The effect of nonfarm income on investment in Bulgarian family farming

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.