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Sri Lanka's Rural Non-farm Economy: Removing Constraints to Pro-poor Growth

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Author Info
Jin, Songqing
Deininger, Klaus
Sur, Mona

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Abstract

We use a survey of small rural enterprises from Sri Lanka to demonstrate quantitatively the economic importance of this sector and to identify participants' characteristics and obstacles to the sector's expansion and productivity. Value added in the rural non-farm sector is estimated to amount to 80% of agricultural GDP and mean incomes for those having a rural enterprise to be about double of those who do not. Barriers to entry appear to be low and the impact of non-farm enterprise development on inequality modest and temporary, implying the potential for the sector to make a significant contribution to growth and poverty reduction. At the same time, infrastructure constraints (but not regulatory obstacles) pose a formidable barrier to startup of new enterprises and to investment and increased productivity by existing ones. The fact that such constraints emerge as particularly harmful for small enterprises suggests that policies to improve delivery of the public services in question will be important to provide a basis for a flourishing rural non-farm sector which in turn will have an important role for poverty reduction.

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Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2005 Annual meeting, July 24-27, Providence, RI with number 19280.

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Date of creation: 2005
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Handle: RePEc:ags:aaea05:19280

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Keywords: Community/Rural/Urban Development;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  11. Frank Ellis & H Ade Freeman, 2004. "Rural Livelihoods and Poverty Reduction Strategies in Four African Countries," The Journal of Development Studies, Taylor and Francis Journals, vol. 40(4), pages 1-30, April. [Downloadable!] (restricted)
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  20. Lanjouw, Peter, 2001. "Nonfarm Employment and Poverty in Rural El Salvador," World Development, Elsevier, vol. 29(3), pages 529-547, March. [Downloadable!] (restricted)
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  1. Kinda, Tidiane & Loening, Josef L., 2008. "Small enterprise growth and the rural investment climate : evidence from Tanzania," Policy Research Working Paper Series 4675, The World Bank. [Downloadable!]
  2. Loening, Josef & Rijkers, Bob & Soderbom, Mans, 2008. "Nonfarm microenterprise performance and the investment climate : evidence from rural Ethiopia," Policy Research Working Paper Series 4577, The World Bank. [Downloadable!]
  3. McCulloch, Neil & Weisbrod, Julian & Timmer, C. Peter, 2007. "Pathways out of poverty during an economic crisis : an empirical assessment of rural Indonesia," Policy Research Working Paper Series 4173, The World Bank. [Downloadable!]
    Other versions:
  4. Rijkers, Bob & Soderbom, Mans & Loening, Josef, 2009. "Mind the gap ? a rural-urban comparison of manufacturing firms," Policy Research Working Paper Series 4946, The World Bank. [Downloadable!]
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