Impact of increase in non-farm income on income distribution in rural areas of developing countries
2019
Miyake, K. (Kobe University (Japan). Graduate School of Agricultural Science) | Ishida, A.
Many studies have pointed out that non-farm income (income from non-farm wage labor or from an own business) is an important source of income for rural households in developing countries. However, there are conflicting views of its impact on income disparity in rural areas. Therefore, we aim to clarify the impact of nonfarm income on income disparity in rural areas by using micro data for 22 countries (45 cases) that was obtained from the RIGA database of the Food and Agriculture Organization (FAO). Our estimation clearly suggests that non-farm employment (non-farm wage labor and self-employed labor) is an important income-earning opportunity for rural households in developing countries. In addition, the estimation results of the Gini decomposition analysis indicate the following. First, in more than half of the 45 cases considered, the income sources with negative marginal effects of income were farm earnings (38 cases), agricultural wage, and transfer income (41 cases each for the last two). Second, the marginal effects of non-farm wage labor and self-employed income were positive in 33 and 41 cases, respectively. Finally, the estimation results indicate that farm earnings, agricultural wage, and transfer income are sources that mitigate income disparity among rural households, whereas non-farm wage and self-employed income widen it.
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