Chapter 47 Economic Development and the Decline of Agricultural Employment

This chapter considers the linkages between agricultural development and rural non-farm activities. The chapter is motivated by growing evidence that non-farm activities provide an increasingly important share of rural incomes in many low-income questions, questions about whether increasing agricultural productivity is a necessary precondition for raising incomes and reducing poverty in rural areas, and increased evidence of factor and commodity flows between rural and urban areas. Unfortunately, the existing literature is sparse and has not been sufficiently attentive to the underlying structures and mechanisms that drive the relationship between agricultural productivity and rural non-farm change. A particular weakness of this literature is the lack of attention given to the importance of flows of both capital and labor. The reason for this is in part due to the limitations of existing data. An assessment of the strengths and weaknesses of existing data sets is thus also provided, with particular attention to panel data sets that might be useful for assessing the extent of geographic mobility. In order to clarify the relevant issues the Chapter presents a model of the rural economy that permits examination of the linkages between agricultural development and non-farm employment under different regimes distinguished by the mobility of capita and labor. Basic features of the model are then tested using newly available data from South Asia. The Chapter concludes with suggestions for future data collection efforts as well as the development of more sophisticated models of the rural economy.