Household Income Diversification into Rural Nonfarm Activities

The traditional vision of rural economies as purely agricultural is clearly obsolete. Farm households across the developing world earn an increasing share of their income from nonfarm sources (see Table 4.1). And the specialized nonfarm households that emerge often diversify into multiple business activities. Decisions affecting non-farm enterprise creation, closure and growth are, thus, commonly taken within the confines of a multi-activity rural household. Thus, the nonfarm enterprise dynamics, discussed in Chapter 5, fit into a household decision-making environment that helps to shape labor and capital allocations across activities, as well as outcomes. Consequently, a fuller understanding of nonfarm enterprise dynamics requires an assessment of the household decision-making environment within which these decisions are frequently made.

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