A Synthesis of Theoretical Concepts for Analysing Non-Farm Rural Employment

Employment diversification is a major livelihood strategy in rural areas and is thus a focal point of the ongoing rural development debate. The issue of non-farm diversification is undoubtedly complex and its determinants are difficult to identify. Increasingly, there is a need to address, clarify and bring together theoretical concepts for analysing non-farm rural employment (NFRE). With this in mind, the objective of this paper is to summarize and link existing theories and to introduce some new aspects with regard to modelling NFRE and employment diversification. NFRE dynamics are closely interrelated with the institutional framework and its incentives and constraints. The behaviour of rural decision-makers also depends on fundamental determinants such as norms and attitudes. The Sustainable Livelihood Framework (SLF) and the demand-pull and distress-push concept focus on the motives and the context in which diversification strategies evolve. To depict economic incentives we will introduce a welfare model which explains the labour allocation processes. We will show that benefits do not only arise for demand-pull shifters, who take up better paid non-farm employment, but also for distress-push shifters, whose incentive to engage in low-paid non-farm activities is to raise aggregate household income. Finally, the decision-making process itself will form the focus of a behaviour model. It also follows the logic of rational choice and can be integrated into the discussion of a synthesis of concepts for the analysis of NFRE. This, in turn, is meant to provide the basis for future empirical research, as well as serve as a thought-provoking impulse for policy makers.rural non-farm employment, diversification, theoretical framework, Labor and Human Capital, O18, Q12,

Systematic Policy Decisions on Direct Income Payments in Agricultural Policies

Direct income payments (DIP) are in the centre of the discussion in the ongoing political debate whether agricultural policy objectives can be pursued in an economically more efficient and less distorting way. This paper discusses under which circumstances DIP are an appropriate and efficient measure to address the objectives of agricultural policies. It identifies and examines the characteristics that DIP should have in the context of different objectives. If governments want to meet their policy objectives by the use of DIP efficiently, a precise definition of the objective is crucial. An optimal policy design achieves a specific objective while keeping the impact on economic distortions low and ensuring efficiency in the allocation of resources. The decision tree for DIP presented in this paper contributes to a more systematic approach to the topic and facilitates the policy design for a sustainable and resource saving economic policy in the field of agriculture. We show that DIP can be used to address different types of policy objectives, but have to be adapted carefully depending on the specific targets. If used as a measure to compensate income losses due to policy changes, DIP could help farmers to adjust to policy changes in an efficient way and, at the same time, release budget funds. Such gains could then be used in and tied to areas that are known to be crucial but currently lack resources due to budget restrictions e.g. the provision of environmental goods and services, which can also be addressed by DIP.Direct income payments, agricultural policy, policy objectives, decision tree, Agricultural and Food Policy, Q18, E6, H5,

Effects of rural non-farm employment on economic vulnerability and income distribution of small farms in Croatia

Replaced with revised version of paper 10/06/09.rural non-farm employment, rural poverty, Croatia, income distribution, Agribusiness, International Development, Labor and Human Capital, Q12, P25, O15, O18,

Patterns and Determinants of International Migration in Northern Albania

The European Union (EU) is the main source of remittances world wide and Albania, struck by abject poverty, is Europe’s number one country sending out migrants. Albania’s economy as well as its households’ welfare strongly depend on remittances. Consequently, the topic of migration is cutting-edge for EU and Albanian policy makers. Thus, up-to-date information is decisive for taking effective policy measures. This poster paper aims at making a fruitful contribution to understanding the varied context of migration in Albania. It presents recent data on socio-economic characteristics of households with absent family members. A binary logistic regression is employed to identify determinants of participation in international migration in Northern Albania.Albania, migration, remittances, Labor and Human Capital,

Non-Farm Diversification Decisions of Rural Households in Macedonia

The non-farm sector is crucial to rural households in transition economies since it offers employment, reduces urban migration and can contribute to poverty reduction, economic growth and a more equal income distribution. This study on diversification decisions and rural incomes reviews evidence from a household survey in Macedonia. It looks at non-farm diversification dynamics and analyses income portfolios and driving forces of diversification decisions. The results confirm that non-farm employment and diversified income portfolios are outstanding features of rural households in Macedonia, where unfavourable economic conditions and insufficient farm incomes have driven farm households to open up income sources in the non-farm sector. Further adaptations of employment strategies are also expected in the future. Three main strategies are identified and analysed by a multinomial logistic regression model: (1) diversification, (2) abandoning of farming activities and (3) expansion of the farm. Households following these strategies can be characterised according to their distinctive profiles. The diversification strategy typically occurs under unfavourable economic conditions, but the households following it can rely on young, well-educated and flexible household heads. Farm households who intend to abandon agriculture are more likely to be located in remote areas. Two types of typical abandoners were identified. The first group represents the phase-out of uncompetitive small-scale farms with no successor. The second group is particularly characterised by their high mobility and their positive attitude towards non-farm employment. The farm expansion strategy occurs under more favourable economic conditions, including a better access to land and positive attitudes towards agriculture.Diversification strategies, non-farm employment, rural development, Macedonia, Consumer/Household Economics, D1, O18, Q12,

Non-farm income diversification of rural farm households in Central and Southeastern Europe: an application of fuzzy set theory

A fuzzy logic model for quantifying farm households’ potential for non-farm income diversification is developed and applied to 1,077 farm households in Bulgaria, Hungary, Poland, Romania, and Slovenia. About three quarters of households have a diversification potential, but not all households use it. An analysis of diversification potential and diversification behaviour shows that there are seven household types in the sample. Not all development options, i.e. farm development, farm exit, or starting non-farm employment, are equally suitable for all households thus fine targeting of policy measures according to the household type could be important for policy makers.rural development, non-farm rural employment diversification, fuzzy logic, transition countries, Community/Rural/Urban Development, C65, D33, J24, Q12,

Some Conceptional Thoughts on the Impact of Social Networks on Non-farm Rural Employment

Everybody knows: rural regions offer fewer possibilities for non-farm employment than urban areas. For this reason, it was the semi-subsistence farm structures that had to absorb the released workers from the big rural state enterprises and the urban-rural migrants fleeing unemployment in the towns in the course of economic transformation. This has created hidden unemployment in farm households and thus low agricultural labour productivity in the European transition economies. From a policy point of view, it is therefore desirable to promote new jobs outside the farm sector in order to decrease the livelihood dependency on agriculture. But do rural people actually have a choice? And if so, will they go for non-farm employment? In Europe's transition economies rural people taking up non-farm jobs seem to do this predominantly due to distress-push and not so much due to demand-pull factors. The former would imply that distress pushes them to earn money even in very low-paid jobs. The latter indicates better remunerated job options because there is demand. When individuals decide what kind of employment to go for, they consider among other factors also the support they can get from relatives and friends, the opinion of the local society in general, the resources they can mobilize and the barriers they are supposed to overcome. Since the late 1990s, a number of studies have been done with respect to non-farm rural employment (NFRE) and its contribution to rural development. However, the role of social capital and the underlying networks in getting access to NFRE has not yet been researched. The objectives of this paper are to give an overview of the social capital concepts, stressing on bonding, bridging and linking social capital.Rural non-farm employment, social networks, transition, Community/Rural/Urban Development, Labor and Human Capital,

Außerlandwirtschaftliche Diversifikation im Transformationsprozess. Diversifikationsentscheidungen und -strategien ländlicher Haushalte in Slowenien und Mazedonien

Problem and objectives. Non-farm rural diversification is gaining prominence in the debate on rural development since the end of the 1990s. The expansion of non-farm employment and the diversification of incomes are important policy objectives because they offer a solution to the employment and structural problems of a shrinking agricultural sector. Development policies focusing on the rural non-farm sector aim at offering employment options and reducing urban migration. They can contribute to poverty reduction, economic growth and a more equal income distribution. This research is based on a household survey including 240 randomly selected rural households in the regions of Gorenjska and Pomurska in Slovenia as well as Gevgelija and Kumanovo in Macedonia. The study was financed by a research grant of the European Union (EC-PHARE-ACE Project P98-1090-R). An additional qualitative component of the empirical research was done within the DFG-Project HE 1416/10-1. Since empirically based insights on diversification dynamics in transition countries are hardly available, the objective of this research is to contribute to filling this gap. The analysis focuses on diversification strategies and determinants of the decision-making process of rural people in regard to non-farm employment. It aims at formulating policy measures to promote the rural non-farm sector. The methodology combines an inductive and deductive approach with qualitative and quantitative components. For the statistical analysis primarily logistic regression models are applied. Rural non-farm diversification in Slovenia and Macedonia. Rural households in the research area are highly dependent of non-farm incomes which contribute to the household income portfolios with 44% in Slovenia and 49% in Macedonia. The contribution of agricultural incomes increases from the poorest income group to the better-off. While better-off households are relying more on self-employment, wage employment as well as non-earned income components play a more important role for the poor. As expected the poverty risk between the two countries differs: The risk to be poor is about 60% higher in Macedonia than in Slovenia. Rural household incomes in Macedonia are also less equally distributed. Decomposed Ginicoefficients based on non-farm incomes point at their positive effect on the income distribution. Decreasing agricultural incomes lead to distress-push diversification, which is expected as the predominant answer of rural households to the shock of transformation. A low income level in the agricultural sector was found to be the main determinant of the diversification level in both countries. The analysis of diversification strategies indicates that coping strategies as well as risk-minimising strategies prevail. Both these strategies are a result of distress-push dynamics. Accumulation strategies, which point at demand-pull dynamics and entrepreneurship, are less common. Attitudes towards agriculture seem to influence diversification decisions in particular. While attitudes towards non-farm activities are predominantly positive, they vary towards agriculture. Negative attitudes towards agriculture are wide-spread among the younger generation. In the age group from 16 to 25 years the proportion of negative attitudes is high in both countries, but the share in Macedonia with 50% is twice as high as in Slovenia. With regard to norms non-farm activities are often seen as a means to enhance prestige while in regard to agriculture the opinion often was: ‘Young people nowadays feel ashamed to work in agriculture’. Important constraints of diversification in Macedonia are the non-farm labour market, low wages, insecurity and late wage payments. In both countries capital and credit availability are named as the most important reasons for not starting a business in the non-farm sector. As expected, Macedonian households consider themselves more constrained in this regard compared to Slovenian households. In both countries rural people are rather risk-averse and the majority is not willing to take up a loan at all. A lack of skills, knowledge and information are seen as less decisive by the households. According to expert interviews these factors are underrated though in their importance for constraining access to nonfarm employment. The pressure to adapt income strategies is lower in Slovenia in general. When looking at individual employment strategies it becomes apparent that in both countries there is a declining trend of agricultural and combined employment while non-farm employment alone is increasing. In Slovenia the high level of diversification at the household level is stabilising while the structural problems in the agricultural sector persist. In contrast, the level of diversification in Macedonia is expected to further increase even though the willingness to give up agricultural activities altogether is significantly higher than in Slovenia. This leads to the conclusion that in a more favourable economic situation this trend might intensify and thus facilitate structural adjustment in Macedonia. Policy recommendations. A promotion of the rural non-farm sector is an important policy objective as non-farm employment has a positive impact on rural incomes, particularly in poorer households. In the researched areas in Slovenia and Macedonia a positive effect of non-farm incomes on the income distribution has been found. This underlines the importance of the non-farm sector as an essential component of a poverty-oriented rural development policy. It should be stressed though that the implementation of policy measures should focus on sustainability. Mere distress-push dynamics usually go along with overly small micro-businesses which cannot provide a basis for economic growth. Thus demand-pull driven employment dynamics are more suitable for sustainable rural development promotion. To overcome one of the most important constraints in regard to entrepreneurship policy-makers should focus on rural financial markets and provide a conducive framework for affordable longterm credits. To encourage investments it is also necessary to overcome the wide-spread feeling of insecurity and economic stress by building up reliable economic institutions. A general lack of ideas, creativity and entrepreneurial spirit points at the need of training, information centres and advisory services, which could motivate rural households to start non-farm businesses. In the long term rural development policies should aim at overcoming the unfavourable small-scale agricultural structure which is the main cause of distress-pushed diversification – particularly if full-time employment in the nonfarm sector is not available. For this it is essential to support education and knowledge-building, and to offer expert advice. The intention should be to enhance entrepreneurship, creativity and the willingness and ability to take economic risks. Furthermore, the success of any effort to improve rural development policies depends on locally developed strategies, since the heterogeneity of the non-farm sector calls for decentralised political concepts. With these prerequisites the non-farm sector will be able to absorb labour released from agriculture, and the necessary structural adjustment of the agricultural sector can take place

Systematic Policy Decisions on Direct Income Payments in Agricultural Policies

Direct income payments (DIP) are in the centre of the discussion in the ongoing political debate whether agricultural policy objectives can be pursued in an economically more efficient and less distorting way. This paper discusses under which circumstances DIP are an appropriate and efficient measure to address the objectives of agricultural policies. It identifies and examines the characteristics that DIP should have in the context of different objectives. If governments want to meet their policy objectives by the use of DIP efficiently, a precise definition of the objective is crucial. An optimal policy design achieves a specific objective while keeping the impact on economic distortions low and ensuring efficiency in the allocation of resources. The decision tree for DIP presented in this paper contributes to a more systematic approach to the topic and facilitates the policy design for a sustainable and resource saving economic policy in the field of agriculture. We show that DIP can be used to address different types of policy objectives, but have to be adapted carefully depending on the specific targets. If used as a measure to compensate income losses due to policy changes, DIP could help farmers to adjust to policy changes in an efficient way and, at the same time, release budget funds. Such gains could then be used in and tied to areas that are known to be crucial but currently lack resources due to budget restrictions - e.g. the provision of environmental goods and services, which can also be addressed by DIP

Evaluating the implementation process of LEADER in Romania

LEADER supports integrated rural regional development. The programme is characterized by a participatory and bottom-up approach, public-private partnerships, multi-sectoral regional development strategies and innovation. An obligatory Common Monitoring and Evaluation Framework (CMEF) was set up for evaluating EU interventions. The CMEF builds upon sets of common indicators and evaluation questions. Romania, where LEADER is currently introduced, has set national priorities for the programme implementation. For assessing the impact of LEADER in Romania meaningfully, an extension of the CMEF is needed. This paper, identifies and suggests appropriate indicators. Social Network Analysis is proposed as a tool for investigating intangible outcomes of LEADER in a quantitative way