growth linkages between the RNFE and
farming); and (ii) the integration of farming into national and international value chains, shifting
value addition to rural areas (see Davis and Bezemer, 2003). This should assist rural areas in
taking advantage of the potential benefits of globalisation and improve local incomes.
2.1 Composition of the RNFE
For most rural people in developing and transitional economies, rural non-farm activities are part
of a diversified livelihood portfolio. The rural population in developing countries derive
important income shares from rural non-farm activities. Ellis (2000) states that 30-50% is
common in sub-Saharan Africa, and FAO (1998)1 gives a mean figure of 42% for SSA. In Asia
and Latin America, FAO estimates the figures to be 32% and 40% respectively (Ellis (2000) gives
1 The FAO study summarises data from over 100 studies - focussing mainly on farm households - undertaken over
three decades (1970’s to the 1990’s).
9
appreciably higher estimates for South Asia). Bezemer and Davis (2003) found that the average
non-farm income shares of rural households in some CEE/CIS countries is between 30 and
70%.
Table 1. Rural Non-Farm Income Shares by Region
Region Average Share
Africa 42
- East/South 45
- West 36
Asia 32
- East 35
- South 29
Latin America 40
Eastern Europe & CIS2 44
Source: Reardon et al (1998) FAO the State of Food and Agriculture; Bezemer and Davis (2003).
Table 2 below shows a composition of RNF employment in LDCs and transition economies.
Agriculture still dominates, as the most important sector of economic activity for LDCs.
Manufacturing is less important in terms of income and employment than the services and
commerce sectors. Indeed, in our review of DFID financed projects and research in this area, we
found that these sectors seem to be both higher growth sectors and of particular importance to
the poor. Within the RNFE, earnings from self-employment and non-farm wage employment
dominate agricultural wage earnings and remittances.
Table 2. Composition of RNF employment by Region (primary workers)*
Region % Rural
workers
employed in
RNF activity
% Women
of total
rural
workers
% Of total in
manufacturing
% Of total
in trade and
transport
% Of total
in other
services
% Of total
in other
activities
Africa 10 26 23 21 24 30
Asia 24 20 27 26 31 14
Latin America 35 27 19 19 27 33
West & North
Africa
22 11 22 21 32 23
Eastern
Europe
47 37 38 20 26 15
Source: Haggblade, Hazell and Reardon (2002).
* These are indicative rather than precise unweighted averages.
2.2 What motivates diversification into the RNFE?
In poor rural areas some households will make a positive choice to take advantage of
opportunities in the rural non-farm economy, taking into consideration the wage differential
between the two sectors and the riskiness of each type of employment. Rising incomes and
opportunities off-farm then reduce the supply of labour on-farm. However, other households are
pushed into the non-farm sector due to a lack of opportunities on-farm, for example, as a result
of drought or smallness of land holdings. This may result in a similar pattern of rising non-farm
2 This figure represents surveys conducted by NRI and partners on six CEE and CIS states. The average rural nonfarm
income shares range from 31% in Armenia to 68% in Bulgaria.
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incomes, but the motivations are quite different. For policy makers it is important to understand
why an individual is entering the non-farm rural market. One of the key areas of discussion in the
literature is to understand if individuals respond to new opportunities in the RNFE. This has
been discussed with reference to many dichotomies which essentially refer to the same
distinction: demand-pull/distress-push, coping/accumulating, need/opportunity, etc. Demand-pull
diversification is a response to new market or technological opportunities, while distress-push
diversification is driven because there are no opportunities on-farm - Islam (1997) suggests that
factors that lead to demand-pull diversification include the increased income of lower and
middle-income households and increased demand from urban areas for rural products. He
identifies successive droughts that depress income and hence increase the need for alternative
incomes offering low-skill income as a distress-push factor. As evidence of distress-push,
marginal wages or incomes are likely to be lower in the non-farm rural economy than on farm
agricultural earnings.
Recent work by Bezemer and Davis (2003) on Armenia, Georgia and Romania shows that
distress-push diversification is what drives the majority of the rural poor into RNF employment
and income generating activities. Davis and Pearce (2000) discuss the importance for policymakers
to make this distinction between distress-push and demand-pull since each may require
different policy responses. The former may require policymakers to develop appropriate social
safety net and interventionist policies to mitigate the short-run negative effects that sometimes
accompany this type of diversification (for example, over-rapid urbanisation, negative
environmental impacts etc.). Where demand-pull factors are driving the process of
diversification, policy-makers might seek to provide a suitable “enabling environment” to support
the development of the RNFE and sustainable rural livelihoods. However, deciding on whether
demand-pull or distress-push factors are at work may not be straightforward.
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