Working Paper: Off-the-farm Livelihood Choice of Farm Households in India

No: WP-2019-032

AUTHOR: Varun Kumar Das and A. Ganesh-Kumar

TITLE: Off-the-farm Livelihood Choice of Farm Households in India

Abstract: The process of structural transformation in India presents some unique features not seen in the developed countries, viz., seasonal migration from rural to rural areas within the country for employment within the agricultural sector, and the phenomenon of in situ occupational diversification into off-farm activities by farm households in the country. This paper analyzes the determinants of such off-farm livelihood diversification by farm households. The paper argues this process is driven by various household and farm level push factors as well as structural pull factors that are beyond the farmer’s control. To test this hypothesis, the paper estimates a multinomial probit model that distinguishes five categories of off-farm activities, viz., wage labor (farm sector), wage labor (non-farm sector), non-farm entrepreneurship, both wage labor (farm) and non-farm entrepreneurship, and both wage labor (non-farm) and non-farm entrepreneurship. Results show that apart from farm and household conditions, structural features such as the village neighborhood, infrastructure, agro-climatic conditions, urbanization, and size of the state economy impact household decision on non-farm diversification.

Keywords:  Structural transformation; non-farm diversification; off-farm choice; wage labor; entrepreneurship; external conditions

JEL Code:  J24; O12; O18; Q12; Q13; R53