Determinants of various modes of rural non-farm sector (RNFS) employment in SAT (semi-arid tropics) and Eastern regions
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Determinants of various modes of rural non‑farm sector (RNFS) employment in SAT (semi‑arid tropics) and Eastern regions of India: an empirical analysis Anviksha Drall1 · Sabuj Kumar Mandal1
© Editorial Office, Indian Economic Review 2020
Abstract The objective of the present study is to identify the major motivating factors and thereby tracing out the existence of any entry barrier for several categories of rural non-farm sector (RNFS) employment in India. We conduct our analysis using household-level data from semi-arid tropics (SAT) and Eastern regions of India for the period 2010–2014. We disaggregate the RNFS activities into various categories—wage employment, self-employment, and others—and use a multinomial logit model as the baseline model to determine the factors driving participation in the various types of non-farm employment. Furthermore, Heckman Selection Model to account for selection bias in our sample and a multinomial fractional logit model to account for the intensity of RNFS income are used. The empirical results, based on a multinomial logit model, reveal that education in general and technical education, in particular, access to credit and endowment of social capital, are the major determinants of RNFS employment in India. However, these determinants are not same across the various RNFS sub-sectors. It is found that while education affects participation in wage employment and self-employment, technical education affects participation in wage employment and others only. Also, social capital determines employment in self-employment and wage employment, but does not determine employment under the ‘others’ category. Other factors that determine RNFS diversification are land and non-land assets, age, and gender of the household head, household size and distance from market. Policy implications of our empirical results are also discussed. Keywords Diversification · Rural non-farm sector · Entry barriers · Multinomial logit model · Multinomial fractional logit model · Heckman JEL Classification Q10 · Q12 * Anviksha Drall [email protected] 1
Department of Humanities and Social Sciences, Indian Institute of Technology, Madras, India
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A. Drall, S. K. Mandal
1 Introduction The farm sector has always been perceived as the major source of income for rural households in developing and transition economies. However, of late, diversification into the rural non-farm sector (hereinafter, RNFS) has become a norm across these economies. For instance, the RNFS accounted for a significant portion of the total income in Asia (32%), Africa (42%), and Latin America (40%) (Reardon et al. 1998). This could be attributed to the abysmal conditions of the farm sector which pushes the farmers (especially the small and marginal ones) into the RNFS, or to the relatively higher return in the RNFS which pulls the farmers towards the RNFS. As noted by Ellis (2007), farm households grapple with the issues of income instability and consumption smoothening, and in such a scenario, RNFS diversif
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