Employment Dynamics and Linkages in the Rural Economy: Insights from Senegal

Evidence on rural wage employment is thin and lacks nuance for different employment sources, insights on dynamic effects, and an understanding of the channels of effects. We assess conceptually and empirically the direct and indirect welfare effects of entry and continuation in different types of wage employment in rural Senegal. Using panel data, fixed effects and first‐difference estimation, we show substantial positive welfare and linkage effects. We find that participation in wage employment increases per capita income by 143%, and reduces poverty, poverty gap and food insecurity by, respectively, 63%, 89% and 48%. While the direct effect on income is larger for non‐agricultural and contractual wage employment, the indirect income effects through self‐employment are more pronounced for agricultural and casual wage employment. Our results imply that job creation is important for rural development, that wage employment in agriculture can lead to considerable growth multiplier effects, and that synergies exist between large‐scale and small‐scale agriculture.