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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.

Suggested Citation

  • Jin, Songqing & Deininger, Klaus W. & Sur, Mona, 2005. "Sri Lanka's Rural Non-farm Economy: Removing Constraints to Pro-poor Growth," 2005 Annual meeting, July 24-27, Providence, RI 19280, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea05:19280
    DOI: 10.22004/ag.econ.19280
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    2. Tidiane Kinda & Josef Loening, 2010. "Small Enterprise Growth and the Rural Investment Climate: Evidence from Tanzania," African Development Review, African Development Bank, vol. 22(1), pages 173-207.
    3. 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.
    4. Sosina Bezu & Christopher Barrett, 2012. "Employment Dynamics in the Rural Nonfarm Sector in Ethiopia: Do the Poor Have Time on Their Side?," Journal of Development Studies, Taylor & Francis Journals, vol. 48(9), pages 1223-1240, September.
    5. 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.
    6. 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).
    7. Mohammod Lutful Kabir, 2015. "Gender Considerations for Rural Poverty Reduction in Bangladesh," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 16(2), pages 309-324, September.
    8. Rijkers, Bob & Costa, Rita, 2012. "Gender and Rural Non-Farm Entrepreneurship," World Development, Elsevier, vol. 40(12), pages 2411-2426.
    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 & 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.
    11. 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.
    12. World Bank, . "Sri Lanka - Poverty Assessment : Engendering Growth with Equity, Opportunities and Challenges," World Bank Other Operational Studies, The World Bank, number 8050, March.
    13. 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.
    14. Anjani Kumar & Nijara Deka & Seema Bathla & Sunil Saroj & S. K. Srivastava, 2020. "Rural Non-farm Employment in Eastern India: Implications for Economic Well-being," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 63(3), pages 657-676, September.

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