Heterogeneity in the Off-Farm Labor Market: A Panel Data Evidence from Bangladesh

This study investigates the relationship between earned nonfarm income and farm performance in Bangladesh. Specifically, the study assesses the impact of components of nonfarm income (wage, self-employment, and salary incomes) on input utilization and technical efficiency. The study uses panel data from Bangladesh's Integrated Household Survey (BIHS) and Tobit procedure to account for potential censoring in our dependent variables. Findings reveal that although overall earned nonfarm income positively affects total crop production expenditures and investments in seeds and irrigation, it shows a negative impact on expenses for fertilizer, labor, and equipment. The disaggregated sources of earned nonfarm income show that nonfarm income sources have heterogeneous effects—salary and wage income generally decrease agricultural investments and technical efficiency. Still, self-employment income shows a positive impact on expenditures for farming inputs and technical efficiency. Finally, climatic shocks significantly influence input use patterns, with affected farmers increasing expenditures on fertilizer, irrigation, and labor. These results contribute to a deeper understanding of the complex interplay between sources of earned nonfarm income and farm performance and technical efficiency in Bangladesh.