Effects of non-farm employment on rural income inequality in developing countries: An investment perspective

This paper makes several points based on a review of household survey evide nce from Africa, Asia and Latin America. (i) lit contrast to conventional w isdom, the evidence is very mixed as to the effect of non-farm employment o n rural income inequality The non-farm employment and microenterprise progr ammes now in vogue will not necessarily resolve rural income inequality pro blems and attendant social tensions nor a automatically benefit the poor (i i) Policymakers should be worried by substantial evidence of poor people's inability to overcome important entry barriers to many non-farm activities. (iii) The main determinants of unequal access to non-farm activities are t hr distribution of capacity to make investments in non-farm assets and the relative scarcity of low capital entry barrier activities. Therefore, it is crucial for public investments and policy to favour an increase in the acc ess of the poor to assets that allow them to overcome non-farm employment e ntry barriers. (iv) It would be an error to assume that one can address ass et-poverty and inequality in the non-farm sector without addressing farm-si de problems and vice versa.