Rural nonfarm employment : a survey

So little is known about the rural nonfarm sector that those making policy to assist rural small-scale enterprises have done so largely"unencumbered by evidence". The Lanjouw survey of nonfarm data and policy experience attempts to correct this. Until recently, the commonly held view was that rural nonfarm employment was relatively nonproductive, producing goods and services of low quality. The rural off-farm sector was expected to wither away with development and rising incomes, and this was viewed as a positive, rather than a negative, event. A corrollary of this view was that the government need not actively worry about the sector -- or be concerned about how policies elsewhere might harm it. More recently, opinion has swung the other way, and it is increasingly argued that neglect of the sector would be mistaken. The survey highlights the positive roles that the rural nonfarm sector can play in promoting both growth and welfare. In the widespread situation of a rural workforce growing faster than the employment potential in agriculture, the nonfarm rural sector can lower unemployment and slow rural-urban migration. It is particularly useful in employing women and providing off-season incomes. The technologies used in small-scale rural manufacturing may be more appropriate and thus generate greater income from available productive inputs. What role could government play in promoting the nonfarm sector? The emphasis of government policy has been on large-scale urban industry as the main engine of growth. More recently, there has been a move toward a more"broad-based growth"approach, with greater emphasis on the development of agriculture and the rural economy. Increasingly countries have targeted project assistance schemes, for example to provide training, infrastructure, and technology to support small-scale and rural enterprises. Nonetheless, in most countries it remains true that projects to support the nonfarm rural sector are undertaken in a policy environment which is biased against this sector.Environmental Economics&Policies,Municipal Financial Management,Economic Theory&Research,Banks&Banking Reform,Labor Policies,Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Municipal Financial Management,Crops&Crop Management Systems

How good a map ? Putting small area estimation to the test

The authors examine the performance of small area welfare estimation. The method combines census and survey data to produce spatially disaggregated poverty and inequality estimates. To test the method, they compare predicted welfare indicators for a set of target populations with their true values. They construct target populations using actual data from a census of households in a set of rural Mexican communities. They examine estimates along three criteria: accuracy of confidence intervals, bias, and correlation with true values. The authors find that while point estimates are very stable, the precision of the estimates varies with alternative simulation methods. While the original approach of numerical gradient estimation yields standard errors that seem appropriate, some computationally less-intensive simulation procedures yield confidence intervals that are slightly too narrow. The precision of estimates is shown to diminish markedly if unobserved location effects at the village level are not well captured in underlying consumption models. With well specified models there is only slight evidence of bias, but the authors show that bias increases if underlying models fail to capture latent location effects. Correlations between estimated and true welfare at the local level are highest for mean expenditure and poverty measures and lower for inequality measures.Small Area Estimation Poverty Mapping,Rural Poverty Reduction,Science Education,Scientific Research&Science Parks,Population Policies

Combining census and survey data to study spatial dimensions of poverty

Poverty maps, providing information on the spatial distribution of living standards, are an important tool for policy making and economic research. Policymakers can use such maps to allocate transfers and inform policy design. The maps can also be used to investigate the relationship between growth and distribution inside a country, thereby complementing research using cross-county regressions. The development of detailed poverty maps is difficult because of data constraints. Household surveys contain data on income or consumption but are typically small. Census data cover a large sample but do not generally contain the right information. Poverty maps based on census data but constructed in an ad-hoc manner can be unreliable. The authors demonstrate how sample survey data and census data can be combined to yield predicted poverty rates for all households covered by the census. This represents an improvement over ad hoc poverty maps. However, standard errors on the estimated poverty rates are not negligible, so additional efforts to cross-check results are warranted.Health Economics&Finance,Environmental Economics&Policies,Services&Transfers to Poor,Poverty Monitoring&Analysis,Public Health Promotion,Poverty Monitoring&Analysis,Health Economics&Finance,Poverty Assessment,Environmental Economics&Policies,VN-Acb Mis -- IFC-00535908

Benefit incidence and the timing of program capture

Survey-based estimates of average program participation conditional on income are often used in assessing the distributional impacts of public spending reforms. But program participation could well be nonhomogeneous, so that marginal impacts of program expansion or contraction differ greatly from average impacts. Using the geographic variation found in sample survey data for rural India for 1993-94, the authors estimate the marginal odds of participating in schooling and antipoverty programs. Their results suggest early capture of these programs by the nonpoor. Thus, conventional methods of assessing benefit incidence underestimate the gains to India's rural poor from higher public outlays, and their loss from program cuts.Services&Transfers to Poor,Primary Education,ICT Policy and Strategies,Poverty Monitoring&Analysis,Health Economics&Finance,Poverty Monitoring&Analysis,Primary Education,ICT Policy and Strategies,Health Economics&Finance,Rural Poverty Reduction

Rural non farm employment in India : Access, income and poverty impact

Attention has been paid to the significance of the non-farm sector in the rural Indian economy since the early 1970s. The importance of earnings from secondary non-farm occupations is not well documented. In this paper an attempt is made to assess the contribution of the nonfarm sector across population quintiles defined in terms of average per capita income. The correlates of employment in the non-farm sector and the direct impact of a growing non-farm sector on agricultural wage rates in rural India have also been examined. The study is based on rural data from 32,000 households belonging to 1765 villages across all parts of India collected by the National Council of Applied Economic Research in 1993-94. Analysis shows that non-farm incomes account for a significant proportion of household income in rural India with considerable variation across quintiles and across major Indian states. Education, wealth, caste, village level agricultural conditions, population densities and other regional effects influence in determining the access to non-farm occupations. Direct contribution of the nonfarm sector to poverty reduction is possibly quite muted as the poor lack the assets. It has also been found that the growth of certain non-farm sub-sectors is strongly associated with higher agricultural wage rates. The analysis presented in this study suggests that the policy makers seeking to maximise the impact of an expanding non-farm sector on rural poverty, should concentrate on two fronts. First, efforts should be focused on removing the barriers to the entry of the poor into the non-farm sector. This involves improving the educational level in rural areas. Second, the policy makers should note the strong evidence of an impact on agricultural wages of the expansion in rural construction employment.EmploymentRural EmploymentPoverty Eradication

Poverty in India during the1990s - a regional perspective

The authors provide estimates of poverty at the regional level in India, spanning the 1990s. Such estimates have not been previously available due to concerns regarding non-comparability of the 1993-94 and 1999-2000 National Sample Survey Organization (NSSO) household survey data. They implement an adjustment procedure to restore comparability based on a methodology developed by Elbers and others (2003). The results indicate a less rapid decline of poverty, at the all-India level than has been suggested by Deaton and Dre (2002), based on a related adjustment methodology. The authors attempt to uncover the source of disagreement across these procedures, by probing a number of their underlying assumptions.Health Economics&Finance,Environmental Economics&Policies,Health Monitoring&Evaluation,Poverty Reduction Strategies,Public Health Promotion,Environmental Economics&Policies,Poverty Assessment,Achieving Shared Growth,Poverty Reduction Strategies,Urban Partnerships&Poverty

The evolution of poverty and inequality in Indian villages

The authors review longitudinal village studies from a variety of disciplinary perspectives to identify changes in living standards in rural India in recent decades. They scrutinize the main forces of economic changes--agricultural intensification, changes in land relations, and occupational diversification--to explain changes in level and distribution of living standards in rural communities. These forces of economic change appear to have offset or at least mitigated the pressure that growing populations can place on existing resources. But the decline in rural poverty has been slow and irregular at best. Nor is poverty reduction only a matter of economic development. For instance, the rural poor often attribute much of the improvement in their living conditions to reduced dependence on patrons. There are few reports in village studies of particularly effective government policies aimed at reducing poverty. The long-term poor still tend to be from the disadvantaged castes and to live in households that rely on income from agricultural labor. There is little evidence that inequalities within village communities have declined. In some cases improved material well-being of rural households has led to greater social stratification rather than less, with women and members of lower castes suffering the consequences. Such inequalities could limit how policy interventions or continued growth can reduce poverty further. Policymakers must ensure accountability to keep abuses--for example, the privileged classes directing all benefits tothemselves--to a minimum.Municipal Housing and Land,Water Conservation,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Banks&Banking Reform,Land Use and Policies,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Rural Land Policies for Poverty Reduction,Municipal Housing and Land

Poverty decline, agricultural wages, and non-farm employment in rural India : 1983-2004

The authors analyze five rounds of National Sample Survey data covering 1983, 1987/8, 1993/4, 1999/0, and 2004/5 to explore the relationship between rural diversification and poverty. Poverty in rural India declined at a modest rate during this period. The authors provide region-level estimates that illustrate considerable geographic heterogeneity in this progress. Poverty estimates correlate well with region-level data on changes in agricultural wage rates. Agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes. Although agricultural labor grew as a share of total economic activity over the first four rounds, it had fallen back to the levels observed at the beginning of the survey period by 2004. This all-India trajectory masks widely varying trends across states. During this period, the rural non-farm sector grew modestly, mainly between the last two survey rounds. Regular non-farm employment remains largely associated with education levels and social status that are rare among the poor. However, casual labor and self-employment in the non-farm sector reveal greater involvement by disadvantaged groups in 2004 than in the preceding rounds. The implication for poverty is not immediately clear - the poor may be pushed into low-return casual non-farm activities due to lack of opportunities in the agricultural sector rather than being pulled by high returns offered by the non-farm sector. Econometric estimates reveal that expansion of the non-farm sector is associated with falling poverty via two routes: a direct impact on poverty that is likely due to a pro-poor marginal incidence of non-farm employment expansion; and an indirect impact attributable to the positive effect of non-farm employment growth on agricultural wages. The analysis also confirms the important contribution to rural poverty reduction from agricultural productivity, availability of land, and consumption levels in proximate urban areas.Rural Poverty Reduction,Labor Markets,Labor Policies,Crops&Crop Management Systems

Poverty and household size

The widely held view that larger families tend to be poorer in developing countries has influenced research and policies. But the basis for this"stylized fact"is questionable, the authors argue. Widely cited evidence of a strong negative correlation between size and consumption per person is unconvincing, given that even poor households face economies of size in consumption. The authors find that the correlation between poverty and household size vanishes in Pakistan when the size elasticity of the cost of living is about 0.6. This turns out to be the elasticity implied by a modified version of the food-share method of setting scales. By contrast, some measures of child nutritional status indicate an elasticity closer to unity. Consideration of the weight attached to child versus adult welfare may help resolve the nonrobustness of demographic profiles of poverty. The authors show that the incidence of severe child stunting is more elastic to household size than their Engel curve estimate suggests, although the latter is still a fair predictor of child wasting. A consideration of the purpose of measuring poverty - notably the extent to which it is used to inform policies aimed at promoting child welfare - may go some way toward resolving the issues.Poverty Lines,Poverty Assessment,Economic Theory&Research,Environmental Economics&Policies,Inequality

Producing an Improved Geographic Profile of Poverty: Methodology and Evidence from Three Developing Countries

Poverty measurement, Poverty profiles, Spatial distribution, Forecasting models, Statistical inference