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Nonfarm activity and rural income inequality : a case study of two provinces in China

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  • Zhu, Nong
  • Luo, Xubei

Abstract

Nonfarm activity plays an increasingly important role in rural household income. Based on data from the Living Standards Measurement Study in the provinces of Hebei and Liaoning, the authors study the distribution of nonfarm income in rural China. First, they assume nonfarm income as an exogenous transfer to total income to decompose the Gini index. Second, they assume nonfarm income as a potential substitute for farm income to take household choices into account and simulate household income. The results show that nonfarm activity reduces rural income inequality by raising the income of poor households to a larger extent than that of rich households. Improving rural infrastructure and implementing universal basic education are critical to build up the capacity of households (in particular, poor households) to participate in nonfarm activity. Strengthening the links between farm activity and nonfarm activity is essential to optimize the contribution of nonfarm activity to pro-poor rural economic development.

Suggested Citation

  • Zhu, Nong & Luo, Xubei, 2006. "Nonfarm activity and rural income inequality : a case study of two provinces in China," Policy Research Working Paper Series 3811, The World Bank.
    • Handle: RePEc:wbk:wbrwps:3811
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    2. Gibson, John & Olivia, Susan, 2010. "The Effect of Infrastructure Access and Quality on Non-Farm Enterprises in Rural Indonesia," World Development, Elsevier, vol. 38(5), pages 717-726, May.
    3. Jianmei ZHAO, 2014. "Rural income diversification patterns and their determinants in China," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 60(5), pages 219-231.
    4. Nong Zhu & Xubei Luo, 2014. "The Impact of migration on rural poverty and inequality: a case study in China," CIRANO Working Papers 2014s-08, CIRANO.
    5. WANG, Zuxiang & SMYTH, Russell & NG, Yew-Kwang, 2009. "A new ordered family of Lorenz curves with an application to measuring income inequality and poverty in rural China," China Economic Review, Elsevier, vol. 20(2), pages 218-235, June.
    6. Ndiaye, Alioune, 2021. "Diversify or Specialise? Impacts of Diversification on Household Welfare and Inequalities in Pastoral Areas in Senegal," 2021 Conference, August 17-31, 2021, Virtual 315898, International Association of Agricultural Economists.
    7. Komikouma Apelike Wobuibe Neglo & Tnsue Gebrekidan & Kaiyu Lyu, 2021. "The Role of Agriculture and Non-Farm Economy in Addressing Food Insecurity in Ethiopia: A Review," Sustainability, MDPI, vol. 13(7), pages 1-22, April.
    8. Dil Bahadur Rahut Chhetri & Pradyot Ranjan Jena & Akhter Ali & Bhagirath Behera & Nar Bahadur Chhetri, 2015. "Rural Nonfarm Employment, Income, and Inequality: Evidence from Bhutan," Asian Development Review, MIT Press, vol. 32(2), pages 65-94, September.
    9. Rahamana, S.M. & Haldarb, S. & Sowmyashree, B.V. & Nandid, S. & Malangmeih, L. & Bera, B.K., 2016. "Impact of Nonfarm Activity on Rural Income Inequality in South 24 Parganas District of West Bengal," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 29(1).
    10. Kumari, Anita & Kumar Sharma, Anil, 2017. "Infrastructure financing and development: A bibliometric review," International Journal of Critical Infrastructure Protection, Elsevier, vol. 16(C), pages 49-65.
    11. Kimhi, Ayal, 2009. "Land Reform and Farm-Household Income Inequality: The Case of Georgia," Discussion Papers 54159, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    12. Rahaman, Sk. Mahidur & Halder, Surajit & Pal, Subhadip & Ghosh, Abhishek, "undated". "Role of rural off-farm employment in earning income and livelihood in the coastal region of West Bengal, India," 2015 Conference, August 9-14, 2015, Milan, Italy 212697, International Association of Agricultural Economists.
    13. Jianmei Zhao & Peter J. Barry, 2014. "Income Diversification of Rural Households in China," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 62(3), pages 307-324, September.

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    Keywords

    Rural Poverty Reduction; Poverty Monitoring&Analysis; Services&Transfers to Poor; Poverty Diagnostics; Inequality;
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