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Determinants of Non-farm Income Diversification in Developed Villages of Bangladesh

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  • Mohammad Abdul Malek
  • Koichi Usami

Abstract

Problem statement: Though the Non-Farm Sector (NFS) has been prioritized in the national policy documents, empirical evidences based on the broader definition of the sector seem to be insufficient about its role both in income diversification and income distribution especially in segmented area of rural Bangladesh. Approach: We use income inequality Gini decomposition method for exploring the role of Non-Farm Incomes (NFIs) and censored Tobit regression for estimating determinants of NFI diversification. We use original data collected from a field survey on individual participation in farm and Non-Farm Activities (NFAs), labor time and household incomes of 214 randomly selected households in four villages of a typical developed rural area, namely, Comilla Sadar Upazila (Sub-district), for the year 2005-06. Results: The NFAs are undoubtedly no longer "marginal" in the case study villages. In addition to supporting the fact that despite having the greater role of the NFS in income diversification and increasing household income, the NFI components do very little or nothing to reduce income inequality, our Gini-decomposition results suggest that further unevenly access to local high return non-farm self-employments and out-country remittance employments would actually aggravate the income distribution. In addition to local NFS, our econometric results give us several important insights for non-local remittance (out-country) and other incomes (transfers): Lower extent of local high-return Household Non-Farm Enterprises (HNFEs) is a reality and landholding is crucially important for financing such HNFEs. For high-return non-farm wage employments and out-country remittance incomes, where the low-income households have limited access, education is particularly important. Participation of female in direct economic activities is negligible. Social capital and local institutions are not significantly active in promoting either local or non-local NFS. Conclusion/recommendations: The future NFS development strategy, thus, should be aimed at promoting high-return HNFEs and creating out-country remittance employment opportunities for the low income households, making local institutions more effective, and increasing female participation in direct economic activities.

Suggested Citation

  • Mohammad Abdul Malek & Koichi Usami, 2009. "Determinants of Non-farm Income Diversification in Developed Villages of Bangladesh," American Journal of Economics and Business Administration, Science Publications, vol. 1(2), pages 141-149, June.
    • Handle: RePEc:abk:jajeba:ajebasp.2009.141.149
    DOI: 10.3844/ajebasp.2009.141.149
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    References listed on IDEAS

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    Cited by:

    1. Anviksha Drall & Sabuj Kumar Mandal, 2020. "Determinants of various modes of rural non-farm sector (RNFS) employment in SAT (semi-arid tropics) and Eastern regions of India: an empirical analysis," Indian Economic Review, Springer, vol. 55(2), pages 253-282, December.
    2. M. J. Hossain & A. Debnath & M. F. Imam & M. A. Islam & F. Elahi, 2019. "Effects Of Non-Farm Income On Poverty And Inequality In Rural Bangladesh," Bangladesh Journal of Agricultural Economics, Bangladesh Agricultural University, vol. 39(1&2), December.
    3. Mondal, Ripon Kumar & Selvanathan, Eliyathamby A & Selvanathan, Saroja, 2020. "The impact of rural nonfarm employment on agricultural input use and productivity in Bangladesh," 2020 Conference (64th), February 12-14, 2020, Perth, Western Australia 305251, Australian Agricultural and Resource Economics Society.
    4. M. J. Hossain & A. K. M. Abdullah Al-Amin, 2019. "Non-farm Income and Consumption Expenditures in Rural Bangladesh: Empirical Evidence from Multilevel Regression Modelling," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(2), pages 377-396, June.
    5. Al-Amin, A.K.M. Abdullah & Hossain, M.J., 2019. "Impact of non-farm income on welfare in rural Bangladesh: Multilevel mixed-effects regression approach," World Development Perspectives, Elsevier, vol. 13(C), pages 95-102.
    6. Tao Xu, 2017. "Income Diversification and Rural Consumption—Evidence from Chinese Provincial Panel Data," Sustainability, MDPI, vol. 9(6), pages 1-14, June.

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