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Nonfarm Income, Inequality, and Land in Rural Egypt

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  • Adams, Richard H, Jr

Abstract

The author uses household-level data from a nationally representative survey to analyze the impact of nonfarm income on income inequality in rural Egypt. After pinpointing the importance of nonfarm income to the rural poor, the author decomposes total rural income among five sources, nonfarm, agricultural, livestock, rental, and transfer. He shows that while nonfarm income represents the most important inequality-reducing source of income, agricultural income represents the most important inequality-increasing source. A 1 percent marginal increase in nonfarm income will cause the Gini coefficient of overall income to fall by 12.8 percent. But a 1 percent marginal increase in agricultural income will cause the Gini coefficient to rise by 15.8 percent. The reason for this difference has to do with land, which is distributed very unevenly in this study. Regression analysis of the determinants of income shows that land ownership is positively and statistically related to the receipt of agricultural income but has no statistical relationship to the receipt of nonfarm income. This leads the author to three conclusions: 1) If policymakers are interested in reducing poverty and improving income distribution in rural Egypt, they should focus on nonfarm income - which not only accounts for almost 60 percent of total income for the rural poor but also favorably affects income distribution. 2) Nonfarm income is an inequality-reducing source of income in a land-scarce setting such as rural Egypt because inadequate land"pushes"poorer households out of agriculture and into the nonfarm sector. 3) Agricultural income contributes most to rural income inequality because it is highly correlated with land ownership and with total rural income.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 50 (2002)
Issue (Month): 2 (January)
Pages: 339-63

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Handle: RePEc:ucp:ecdecc:v:50:y:2002:i:2:p:339-63

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  1. Datt, Gaurav & Jolliffe, Dean & Sharma, Manohar, 1998. "A profile of poverty in Egypt: 1997," FCND discussion papers 49, International Food Policy Research Institute (IFPRI).
  2. Shorrocks, Anthony F, 1983. "The Impact of Income Components on the Distribution of Family Incomes," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 311-26, May.
  3. Leibbrandt, M.V. & Woolard, C.D. & Woolard, I.D., 1996. "The Contribution of Income Components to Income Inequality in South Africa. A Decomposable Gini Analysis," Papers 125a, World Bank - Living Standards Measurement.
  4. Chinn, Dennis L, 1979. "Rural Poverty and the Structure of Farm Household Income in Developing Countries: Evidence from Taiwan," Economic Development and Cultural Change, University of Chicago Press, vol. 27(2), pages 283-301, January.
  5. Quan, Nguyen T., 1989. "Concentration of income and land holdings : Prediction by latent variables model and partial least squares," Journal of Development Economics, Elsevier, vol. 31(1), pages 55-76, July.
  6. Stark, Oded & Levhari, David, 1982. "On Migration and Risk in LDCs," Economic Development and Cultural Change, University of Chicago Press, vol. 31(1), pages 191-96, October.
  7. Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
  8. Reardon, Thomas, 1997. "Using evidence of household income diversification to inform study of the rural nonfarm labor market in Africa," World Development, Elsevier, vol. 25(5), pages 735-747, May.
  9. Stark, Oded & Taylor, J Edward & Yitzhaki, Shlomo, 1986. "Remittances and Inequality," Economic Journal, Royal Economic Society, vol. 96(383), pages 722-40, September.
  10. Adams, Richard H. Jr. & He, Jane J., 1995. "Sources of income inequality and poverty in rural Pakistan:," Research reports 102, International Food Policy Research Institute (IFPRI).
  11. Hazell, P. B. R. & Roell, Ailsa, 1983. "Rural growth linkages: household expenditure patterns in Malaysia and Nigeria," Research reports 41, International Food Policy Research Institute (IFPRI).
  12. von Braun, Joachim & Pandya-Lorch, Rajul, 1991. "Income sources of malnourished people in rural areas: Microlevel information and policy implications," IFPRI working papers 5, International Food Policy Research Institute (IFPRI).
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