Rural Non-Farm Economic Development and Poverty Alleviation in Romania

Since the collapse of the Soviet Union, the Romanian rural economy has undergone massive changes. Increased urban unemployment has stimulated migration from towns to rural areas. Meanwhile, rural industries that were subsidised under communism have collapsed, causing rural unemployment. Subsistence agriculture is now vitally important to rural livelihoods. It is a low-risk option for poor people, but it does little to stimulate economic growth. There is a growing focus on the rural non- farm economy (RNFE) as a way of stimulating economic growth that will make use of the high labour supply and improve livelihoods. It is also important for Romania’s EU accession, as the development of remunerative and sustainable non-farm employment opportunities will have important effects in terms of the use of future structural funds. This paper tests the hypothesis that two processes are apparent: demand-pull, where rural people respond to new opportunities; and distress-push, where the poorest are driven to seek non-farm employment as a survival strategy. In addition, it also considers how the RNFE contributes to poverty alleviation. The empirical work presented in this paper is primarily based on a large (nationwide) rural household survey and other field- related research representing a broad range of methodologies.