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Creating good employment opportunities for the rural sector

Despite increasing urbanisation in Asia countries, a large fraction of Asia’s poor remain in rural areas. This paper examines the potential for sector-specific productivity growth, human capital, credit markets, and infrastructure to contribute to the development of stable, well-paid employment in rural areas of low-income countries.

Relying mainly on data from India, the paper introduces the following findings:

  • if landholdings are equally held and all workers are employed on their own farm, expansion in agriculture technology will increase household earnings; however, this model is unrealistic
  • for farmers that do not hold land, the earnings from agriculture depend on the wages that they receive, so if agricultural technology improvements result in increasing mechanisation, wages may fall
  • actually, non-farm earnings now approach almost half of all earnings of rural areas in developing countries, thus what happens to wages will depend critically on what happens to the non-farm sector
  • in practice, non-farm sector can consist of small-scale farms selling services on the local market, and this sort of activity is expected to having an advantageous effect on agricultural wages
  • moreover, policies that promote migration, inclusive of improved schooling and better access to urban labour markets, may also have advantageous effects on rural employment

The author concludes that:

  • expansion in rural employment is likely to be most responsive to a broad spectrum of different interventions
  • yet, special attention should be paid to how individual programs and effects affect the operation of local markets for products and labour and the broader connections of these markets to the wider world
  • it is reasonable to believe that value-added production in agriculture is a potentially valuable source of rural earnings growth
  • accordingly, more emphasis should be placed on increasing the production of goods that incorporate local agricultural products as inputs