IDEAS home Printed from
   My bibliography  Save this article

Poverty decline, agricultural wages, and nonfarm employment in rural India: 1983-2004


  • Peter Lanjouw
  • Rinku Murgai


We analyze five rounds of National Sample Survey data covering 1983, 1987/1988, 1993/1994, 1999/2000, and 2004/2005 to explore the relationship between rural diversification and poverty. Poverty in rural India has declined at a modest rate during this time period. We provide region-level estimates that illustrate considerable geographic heterogeneity in this progress. Poverty estimates correlate well with region-level NSS data on changes in agricultural wage rates. Agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes. We show that while agricultural labor grew as a share of total economic activity over the first four rounds, it had fallen back to the levels observed at the beginning of our survey period by 2004. This all-India trajectory also masks widely varying trends across states. During this period, the rural nonfarm sector has grown modestly, mainly between the last two survey rounds. Regular nonfarm employment remains largely associated with education levels and social status that are rare among the poor. However, casual labor and self-employment in the nonfarm sector reveals greater involvement by disadvantaged groups in 2004 than in the preceding rounds. The implication of this for poverty is not immediately clear-the poor may be "pushed" into low-return casual nonfarm activities due to lack of opportunities in the agricultural sector rather than being "pulled" by high returns offered by the nonfarm sector. Econometric estimates reveal that expansion of the nonfarm sector is associated with falling poverty via two routes: a direct impact on poverty that is likely due to a pro-poor marginal incidence of nonfarm employment expansion; and an indirect impact attributable to the positive effect of nonfarm employment growth on agricultural wages. The analysis also confirms the important contribution to rural poverty reduction from agricultural productivity, availability of land, and consumption levels in proximate urban areas. Copyright (c) 2009 International Association of Agricultural Economists.

Suggested Citation

  • Peter Lanjouw & Rinku Murgai, 2009. "Poverty decline, agricultural wages, and nonfarm employment in rural India: 1983-2004," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 243-263, March.
  • Handle: RePEc:bla:agecon:v:40:y:2009:i:2:p:243-263

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    1. Lanjouw, Peter & Stern, Nicholas, 1998. "Economic Development in Palanpur over Five Decades," OUP Catalogue, Oxford University Press, number 9780198288329, June.
    2. Datt, Gaurav & Ravallion, Martin, 1997. "Why have some Indian states performed better than others at reducing rural poverty?," FCND discussion papers 26, International Food Policy Research Institute (IFPRI).
    3. Yoko Kijima & Lanjouw, Peter, 2003. "Poverty in India during the1990s - a regional perspective," Policy Research Working Paper Series 3141, The World Bank.
    4. Gaurav Datt & Valerie Kozel & Martin Ravallion, 2003. "A Model-Based Assessment of India's Progress in Reducing Poverty in the 1990s," Monash Economics Working Papers archive-32, Monash University, Department of Economics.
    5. Jayaraman, Rajshri & Lanjouw, Peter, 1999. "The Evolution of Poverty and Inequality in Indian Villages," World Bank Research Observer, World Bank Group, vol. 14(1), pages 1-30, February.
    6. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
    7. Angus Deaton, 2003. "Adjusted Indian Poverty Estimates for 1999-2000," Working Papers 200, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
    8. (No last name available), Himanshu, 2013. "Poverty and Food Security in India," ADB Economics Working Paper Series 369, Asian Development Bank.
    9. Ravallion, Martin & Datt, Gaurav, 1996. "How Important to India's Poor Is the Sectoral Composition of Economic Growth?," World Bank Economic Review, World Bank Group, vol. 10(1), pages 1-25, January.
    10. Mellor, John W. & Lele, Uma J., 1973. "Growth Linkages of the New Foodgrain Technologies," Indian Journal of Agricultural Economics, Indian Society of Agricultural Economics, vol. 28(1).
    11. Ravallion, Martin & Datt, Gaurav, 1999. "When is growth pro-poor? Evidence from the diverse experiences of India's states," Policy Research Working Paper Series 2263, The World Bank.
    12. Foster, Andrew D & Rosenzweig, Mark R, 2004. "Agricultural Productivity Growth, Rural Economic Diversity, and Economic Reforms: India, 1970-2000," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 509-542, April.
    13. Ravallion, Martin & Datt, Gaurav, 2002. "Why has economic growth been more pro-poor in some states of India than others?," Journal of Development Economics, Elsevier, vol. 68(2), pages 381-400, August.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Pieters, Janneke, 2010. "Growth and Inequality in India: Analysis of an Extended Social Accounting Matrix," World Development, Elsevier, vol. 38(3), pages 270-281, March.
    2. Magnus Hatlebakk, 2014. "Poverty Dynamics in Rural Orissa: Transitions in Assets and Occupations over Generations," Journal of Development Studies, Taylor & Francis Journals, vol. 50(6), pages 877-893, June.
    3. Asadullah, M. Niaz & Yalonetzky, Gaston, 2012. "Inequality of Educational Opportunity in India: Changes Over Time and Across States," World Development, Elsevier, vol. 40(6), pages 1151-1163.
    4. Christiaensen, Luc & Todo, Yasuyuki, 2014. "Poverty Reduction During the Rural–Urban Transformation – The Role of the Missing Middle," World Development, Elsevier, vol. 63(C), pages 43-58.
    5. Ira N. Gang & Kunal Sen & Myeong-Su Yun, 2017. "Is Caste Destiny? Occupational Diversification among Dalits in Rural India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(2), pages 476-492, April.
    6. Atamanov, Aziz & Van den Berg, Marrit, 2012. "Determinants of the rural nonfarm economy in Tajikistan," MERIT Working Papers 080, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Ojimba, Thankgod Peter, 1. "Socio-Demographic Factors As Determinants Of Poverty In Crude Oil Polluted Crop Farms In Rivers State, Nigeria," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1.
    8. Nidhiya Menon & Yana van der Meulen Rodgers, 2013. "Credit and self-employment," Chapters,in: Handbook of Research on Gender and Economic Life, chapter 22, pages 359-377 Edward Elgar Publishing.
    9. Nidhiya Menon & Yana van der Meulen Rodgers, 2011. "How Access to Credit Affects Self-employment: Differences by Gender during India's Rural Banking Reform," Journal of Development Studies, Taylor & Francis Journals, vol. 47(1), pages 48-69.
    10. repec:spr:agfoec:v:6:y:2018:i:1:d:10.1186_s40100-018-0098-0 is not listed on IDEAS
    11. Emran, M. Shahe & Shilpi, Forhad, 2014. "Agricultural Productivity, Hired Labor, Wages and Poverty: Evidence from Bangladesh," MPRA Paper 58099, University Library of Munich, Germany.
    12. Dutta, Sujoy, 2015. "An uneven path to accountability: A comparative study of MGNREGA in two states of India," Discussion Papers, Inequality and Social Policy SP I 2015-201, Social Science Research Center Berlin (WZB).
    13. Aradhna Aggarwal & Nagesh Kumar, 2012. "Structural Change, Industrialization and Poverty Reduction: The Case of India," Development Papers 1206, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) South and South-West Asia Office.
    14. Christiaensen, Luc & Pan,Lei & Wang, Sangui, 2010. "Drivers of Poverty Reduction in Lagging Regions: Evidence from Rural Western China," WIDER Working Paper Series 035, World Institute for Development Economic Research (UNU-WIDER).
    15. repec:eee:wdevel:v:103:y:2018:i:c:p:239-254 is not listed on IDEAS
    16. Klonner, Stefan & Oldiges , Christian, 2014. "Safety Net for India's Poor or Waste of Public Funds? Poverty and Welfare in the Wake of the World's Largest Job Guarantee Program," Working Papers 0564, University of Heidelberg, Department of Economics.
    17. Benjamin Davis & Paul Winters & Thomas Reardon & Kostas Stamoulis, 2009. "Rural nonfarm employment and farming: household-level linkages," Agricultural Economics, International Association of Agricultural Economists, vol. 40(2), pages 119-123, March.
    18. Mark R. Rosenzweig & Andrew D. Foster, 2010. "Is There Surplus Labor in Rural India?," Working Papers 991, Economic Growth Center, Yale University.
    19. Bachewe, Fantu Nisrane & Berhane, Guush & Minten, Bart & Taffesse, Alemayehu Seyoum, 2016. "Non-farm income and labor markets in rural Ethiopia," ESSP working papers 90, International Food Policy Research Institute (IFPRI).
    20. Hoang, Trung X. & Pham, Cong S. & Ulubaşoğlu, Mehmet A., 2014. "Non-Farm Activity, Household Expenditure, and Poverty Reduction in Rural Vietnam: 2002–2008," World Development, Elsevier, vol. 64(C), pages 554-568.
    21. Ashima Goyal & Akash Kumar Baikar, 2014. "Psychology, cyclicality or social programs: Rural wage and inflation dynamics in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-014, Indira Gandhi Institute of Development Research, Mumbai, India.
    22. Emran,M. Shahe & Shilpi,Forhad J., 2017. "Beyond dualism : agricultural productivity, small towns, and structural change in Bangladesh," Policy Research Working Paper Series 8087, The World Bank.
    23. Basu, Kaushik, 2013. "Shared prosperity and the mitigation of poverty : in practice and in precept," Policy Research Working Paper Series 6700, The World Bank.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:agecon:v:40:y:2009:i:2:p:243-263. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.