Nexus between rural nonfarm income and agricultural production in Bangladesh

Ripon Kumar Mondal, Eliyathamby A Selvanathan and Saroja Selvanathan

Applied Economics, 2021, vol. 53, issue 10, 1184-1199

Abstract: Evidence from the rural livelihood literature shows that farm households in developing countries engage in nonfarm employment to supplement their household income. This raises the question of whether nonfarm income complements or competes with agricultural production due to a possible shift in farm household labour to nonfarm employment. Using survey data, this study examines the impact of rural nonfarm income on farm households’ agricultural production in Bangladesh. Applying the instrumental variable Tobit model, we find a nonlinear relationship between nonfarm income and total production expenditure as well as expenditures on major purchased inputs (equipment, seed, fertilizer, purchased labour). This indicates that when nonfarm income rises, production expenditure increases but at a decreasing rate. Furthermore, the endogenous stochastic frontier production model indicates that technical inefficiency in agricultural production decreases at an increasing rate when nonfarm income rises. Overall, the findings of this study suggest that nonfarm income exerts an income effect on agricultural production by reducing the liquidity constraint and intensifying major purchased inputs. Thus, introducing policies that would increase rural nonfarm income opportunities to rural households complements agricultural production. This would also lead to raised food production, ultimately leading to an increase in food availability as well as food security.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2020.1827138 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:53:y:2021:i:10:p:1184-1199

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2020.1827138

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().