NO : WP-2017-013
AUTHOR : Varun Kumar Das and A. Ganesh-Kumar
TITLE :Drivers of farmers’ income: The role of farm size and diversification
The basic objective of this study is to analyse the role of farm size and diversification in determining farmers’ income. Using data from NSS 70th round Situation Assessment Survey, the study considers two measures of income, viz., farm income per hectare (from crop and animal husbandry) and farmer’s income per capita (from both farm and non-farm sources). Linear, log linear and panel data models are estimated to understand the nature of relationship between income, farm size and the two forms of diversification (on-farm and off-farm diversification). The study finds that a U-shaped relationship exists between farm size and farm / farmer’s income. The results also show that both on-farm and off-farm diversification have an inverted U-shape relationship with farm / farmer’s income. That is, diversification up to some level helps improve income but excessive diversification might lead to misallocation of resources and hence a fall in income. The results also show that engagement in public works programme such as MGNREGA has an adverse impact on farm / farmer’s income, possibly due to the opportunity cost of time spent in such programmes. Finally, positive effect of education on income is seen only at somewhat high education levels.
Keywords : Farm size, farm income, farmer’s income, on-farm / off-farm diversification
JEL Code : L25, Q12, Q15, Q18