Rural Nonfarm Employment and Incomes in Chile

This article analyzes the evolution of rural nonfarm employment (RNFE) and income in Chile during 1990–96. The data used come from the National Socioeconomic Survey (CASEN), and from a household survey undertaken by the authors in two municipalities in 1999. The latter contrasted two zones, very different in terms of economic dynamism and rural poverty. We show that during the period, RNFE and incomes increased 10% and 18%, respectively, in 1996, reaching 39% of rural employment and 41% of rural incomes. The rate of multiactivity (the share of households participating in more than one sector) was only 20%, lower than expected, indicating a tendency toward economic specialization in rural income strategies. The determinants of such employment are mainly household characteristics, in particular variables related to human capital, such as the age and gender of the household head, and the schooling of the household members, although also important are access to credit and physical capital. The level of nonfarm income of rural households is determined mainly by the economic context, in particular the economic level and dynamism of the overall zone and the quality of the roads. It is proposed that policies to develop RNFE should be geared to zone characteristics, and should in general favor investments in education, in roads, and in access to credit. Moreover, households headed by women should be the object of special attention. To promote such policies, it will be necessary to address important gaps and weaknesses in the public institutional structure.