On-Farm and Off-farm Works: Complement or Substitute? Evidence from Rural Nigeria

Farming as a primary source of income has failed to guarantee sufficient livelihood for most farming households in developing countries, and agricultural development policies have largely produced little improvement, especially in Sub-Saharan Africa. Diversification into off-farm activities has become the norm. While the poverty and inequality effects of off-farm income have been analyzed in different developing countries, much less empirical studies have been conducted on the impact of off-farm income on agricultural production and efficiency. Using survey data from rural Nigeria, this article examines the effect of off-farm income on farm output, expenditure on purchased inputs and technical efficiency among farm households. The results indicate that off-farm income has a positive and significant effect on farm output and demand for purchased inputs. Though the result does not establish that off-farm income improves technical efficiency, there is a slight efficiency gains in households with off-farm income. The findings of this study challenge the notion that participation in off-farm activities may lead to a decline in own-farm agricultural production, due to competition for family labour between farm and off-farm works. Rather, they tend to suggest that there are indeed elements of complementarities and positive spill-over effects between the farm and off-farm sectors of rural the economy. Removing credit market imperfections and upgrading rural infrastructure could enhance the development of both sectors simultaneously.

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 Record created 2017-04-01, last modified 2018-01-22

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