Development Trends in ‘Rural Non-Farm’ – What Role Can it Play in Promoting Growth and Livelihoods

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Empirical evidence suggests that productivity of rural non-farm is higher than that of farm and thus expansion of Rural non-farm (RNF) sector implies growth of the rural economies as well as the overall economy. The growth of RNF not only shifts labor from farm sector, it generates additional employment for the rural workforce. This has huge implications for poverty reduction. The growth of RNF sector also slows down migration from rural to urban areas as greater employment and business opportunities are available in the rural areas. When the size of the RNF expands, it tends to create rural-towns and becomes the growth center of the local economy.

Agriculture has gone through massive structural transformation. Since agriculture and RNF dependent on each other, any structural change in agricultural sector has huge implications for RNF. For example, greater mechanization in agriculture leads to development of rental market for capital goods (power tiller, irrigation equipment, thrasher, etc.) in the rural areas. The agriculture has also become more commercialized and an increasing part of the value chains of agricultural products is a part of RNF sector.   On the other hand, landless ad marginal farmers have greater access to agricultural land market which may reduce the shift of labor from agriculture to RNF. Agriculture has seen a shift of mode of tenancy – fixed rate contract has replaced sharecropping substantially. This allows the land owners to shift risk to the tenants and take risks in RNF. Remittances, both national and international, help the growth of RNF sector. Moreover, improvement in the rural infrastructure such as roads, electricity, mobile phones, etc. has led to the growth of non-farm economic activities in rural areas.  With increasing urbanization, RNF activities may increasingly be located in urban/semi-urban centers rather than in villages.

In this backdrop, we look into the following questions.

Research Questions

A. Understanding of how the size and structure of RNF has changed over time

– How share of non-farm wage labor and self-employment has changed over time compared to that of farm? (LFS, HIES, Census since 2000)

– How non-agricultural income of the rural households has changed over time? (HIES since 2000)

– How the relative share of manufacturing and service has changed over time? (Economic census since 2000)

– How the income elasticity of food and non-food has changed over time? (HIES since 2000)

– How the income elasticity of services has changed over time? (HIES since 2000)


B. Understanding of some correlations and causalities

– Determinants of the growth of the RNF

– Rural infrastructure and growth of RNF (Union level analysis, combining population census data with economic census)

– Role of foreign remittance in growth of RNF

– Access to credit and growth of RNF

– Role of RNF in growth of village-towns

Study Team: Kazi Iqbal (Study Director), Kazi Ali Toufique, Nazneen Ahmed, Nahid Ferdous Pabon

About BIDS

The Bangladesh Unnayan Gobeshona Protishthan or The Bangladesh Institute of Development Studies (BIDS) is an autonomous public multi-disciplinary organization which conducts policy oriented research on development issues facing Bangladesh and other developing countries. 

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