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

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  • Jin, Songqing
  • Deininger, Klaus W.
  • Sur, Mona

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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Bibliographic Info

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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Cited by:
  1. Rijkers, Bob & Söderbom, Måns & Loening, Josef L., 2010. "A Rural-Urban Comparison of Manufacturing Enterprise Performance in Ethiopia," World Development, Elsevier, vol. 38(9), pages 1278-1296, September.
  2. Rijkers, Bob & Söderbom, Måns, 2013. "The Effects of Risk and Shocks on Non-Farm Enterprise Development in Rural Ethiopia," World Development, Elsevier, vol. 45(C), pages 119-136.
  3. Neil McCulloch & Julian Weisbrod & C. Peter Timmer, 2007. "Pathways out of poverty during an economic crisis: An empirical assessment of rural Indonesia," Departmental Discussion Papers 131, University of Goettingen, Department of Economics.
  4. Rijkers, Bob & Costa, Rita, 2012. "Gender and rural non-farm entrepreneurship," Policy Research Working Paper Series 6066, The World Bank.
  5. Shahidur R. Khandker & Hussain A. Samad & Rubaba Ali, 2013. "Does Access to Finance Matter in Microenterprise Growth? Evidence from Bangladesh," Working Papers 15, Institute of Microfinance (InM).
  6. Kinda, Tidiane & Loening, Josef, 2010. "Small Enterprise Growth and the Rural Investment Climate: Evidence from Tanzania," MPRA Paper 25894, University Library of Munich, Germany.
  7. World Bank, 2007. "Sri Lanka - Poverty Assessment : Engendering Growth with Equity, Opportunities and Challenges," World Bank Other Operational Studies 8050, The World Bank.
  8. 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.
  9. Rao, Narasimha D., 2013. "Does (better) electricity supply increase household enterprise income in India?," Energy Policy, Elsevier, vol. 57(C), pages 532-541.
  10. 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.

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