ABSTRACT
In rural areas, given the constraints on farm expansion and continuing growth of the rural population, greater attention is being given to non-farm activities (or rural non-farm economy: RNFE) 2 in view of their potential for economic development and poverty reduction (Haggblade et al., 2007; Unni and Raveendran, 2007; Eswaran et al., 2008; Gaiha and Imai, 2007; Lanjouw and Murgai, 2009; 3 Foster and Rosenzweig, 2004; de Janvry et al., 2005). It is now well recognized that rural economies are not purely agricultural and that farm households across the developing world earn an increasing share of their income from non-farm activities. Evidence shows that rural non-farm income (RNFY) constitutes roughly 35 per cent of rural household income in Africa and about 50 per cent in Asia and Latin America. In Bangladesh, as much as 54 per cent of rural income comes from the rural non-farm sector (Hossain, 2004). Further, contrary to conventional wisdom, RNFY exceeds farm labour income by a factor of 5 to 1 in Latin America and by 20 to 1 in Africa (Reardon, 1997; Reardon et al., 1998; Reardon and Timmer, 2007). However, two exceptions occur:
amongst the landless poor and in areas with substantial commercial farming;
among the poorest stratum everywhere. In India, for instance, while the ratio of non-farm to agricultural income is 4.5 to 1 for the average household, for the poor it is only 0.75 to 1 (Lanjouw and Shariff, 2004).
