Rural nonfarm employment and income diversification in Colombia

Using data For rural households from Colombia we find that off-farm employm ent contributes a significant share (45% on average) to household income bu t that the importance of off-farm income and returns to household labor var y over the income distribution. Analysis reveals significant gains from spe cialization but-for households able to specialize-no systematic differences in returns to labor between farm and nonfarm sources. We conclude that, in Colombia, there is no conflict between development of the farm and the non farm sector but that, to maximize gains from nonfarm development and reduce the scope for undesirable distributional consequences, policies enabling h ouseholds to specialize might be called for. (C) 2001 Elsevier Science Ltd. All rights reserved.