The rural non-farm sector: issues and evidence from developing countries

The rural non-farm. sector has traditionally been viewed as a low-productiv ity sector which produces low quality goods. It is often expected to wither away as a country develops. Recent years have seen a shift away from this position towards recognition that the rural non-farm sector can, and often does, contribute to economic growth, rural employment, poverty reduction, a nd a more spatially balanced population distribution. This paper reviews th e literature on the conceptual and empirical underpinnings of this more rec ent perspective, focussing on the experience in developing countries. The p aper documents the size and heterogeneity of the sector, pointing to eviden ce that in many countries the sector is expanding rather than declining. Th e issues associated with measuring the sector's economic contribution are d iscussed, followed by empirical assessments for several countries and regio ns. The distributional impact of non-farm earnings is examined and it is fo und that a pro-poor impact, while by no means inevitable, can be considerab le. The sector's trajectory over time, in different settings, is reviewed a nd the scope for, and experience of, various policy interventions is discus sed. (C) 2001 Elsevier Science B.V. All rights reserved.