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Abstract

This study employed Nigeria’s household data from the RIGA database to examine the effect of off-farm income on rural poverty and income distribution. Specifically, the study employs the Foster, Greer and Thorbecke (FGT) poverty measurement indices to examining the effect of off-farm income on rural poverty and Gini decomposition techniques for the effect of off-farm income on rural income distribution. Our findings suggest that offfarm income as a part of total household income significantly contributed towards reducing the incidence, depth and severity of poverty as evident in the outcomes of the poverty measures for the wage and self employment activities. Same cannot be said for rural income inequality, as off-farm income on aggregate level is observed to increase rural income inequality. Results of the decomposition by income sources revealed that with the exception of self-employment income, other off-farm incomes have unequalising effect on income distribution, an outcome attributed to entry barriers which prevents poor households from undertaken the lucrative kind of off-farm work. Programmes of government and nongovernmental organisations aimed at growth and development of the off-farm sector needs to have an aspect well targeted at the poor rural households to assist them in removing the entry barriers, placing them in a better position to maximise the opportunities in the off-farm sector.

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