Does multiple job holding raise labour use efficiency of the farm operators? Evidence from rural India

Amid various agro-climatic shocks when farm income becomes volatile, farmers often diversify income by holding multiple non-farm jobs. While the impact of multiple jobholding on overall farm efficiency is documented in literature, very little is known about the impact of multiple job holding on farm labour use efficiency. This is important as participation in non-farm activities alters farmers’ labour allocation decisions between farm and non-farm activities. Using a rich household level panel data from eight Indian states for the period 2010–2014 from Village Dynamics in South Asia (VDSA) Project by International Crops Research Institute for the Semi-Arid Tropics and adopting Data Envelopment Analysis, we estimate labour use efficiency. Our Instrumental Variable Tobit estimation shows that multiple job holding increases farm operators’ labour use efficiency significantly. However, the heterogeneity analysis using sub samples demonstrates that the positive impact of multiple non-farm jobs is enjoyed mostly by medium and large farmers. Also, farmers engaged in wage and salary based non-farm employment experience higher labour efficiency once they hold multiple jobs. Self-employed farmers experience higher labour efficiency only if they earn a threshold level of non-farm income. Since multiple job holding improves farm labour use efficiency, more avenues for non-farm employment to be created for agricultural and rural development.