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The Rural Nonfarm Sector and Livelihood Strategies in Sri Lanka : Background Report to Sri Lanka Poverty Assessment (English)

Sri Lanka’s economy underwent steady structural transformation over the last two decades. During this time, economic activities increasingly shifted toward industry and services. Poverty fell significantly during this period, mainly led by nonfarm income growth. The nature of rural nonfarm activities is quite heterogeneous and nonfarm activities can entail low-return activities. Understanding the nature of the rural nonfarm economy is a first step towards assessing its potential to facilitate economic transformation and where policy interventions could be useful. The main findings are two-fold. First, there has been a clear shift from farm to nonfarm activities over the last decade, and livelihoods sources vary significantly across the income distribution. For example, poor households are much more likely to be engaged in farm activities or wage employment in industries, whereas rich households have a higher likelihood of working in services. While both farm and nonfarm activities are vital to support rural livelihoods, it is the nonfarm sector that engages the majority of rural workers. Second, better education is strongly associated with higher participation and payoff from nonfarm activities. Interestingly, education does not seem to influence the choice between engaging in farm and unskilled nonfarm employment, highlighting a possible skills barrier to moving to better-paying nonfarm jobs.


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  • Country

    Sri Lanka,

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    South Asia,

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  • Doc Name

    The Rural Nonfarm Sector and Livelihood Strategies in Sri Lanka : Background Report to Sri Lanka Poverty Assessment

  • Keywords

    farm activity; farm activities; Poverty and Equity; nonfarm sector; farm employment; higher level of education; income generating activity; income-generating activity; purchasing power parity term; access to information technology; large number of women; better-educated worker; livelihood strategy; share of income; private sector employment; access to finance; source income; number of workers; household income diversification; public sector worker; source of income; public sector employment; rural worker; farm jobs; public sector job; primary education level; impact on poverty; multivariate regression analysis; access to land; private sector worker; access to asset; difference in returns; gross domestic product; bottom income quintile; agriculture industry; profile of individual; allocation of asset; share of work; international labour organization; amount of income; farm wage employment; Agricultural Value Chain; value of output; privileges and immunity; lower household income; decline in productivity; average total income; average monthly income; social assistance program; acres of land; relative risk; farm livelihood; poor household; nonfarm income; household size; income share; household head; wage work; labor income; bottom quintile; Land Ownership; rural area; industry services; farm diversification; income source; wage labor; high share; better education; wage worker; employment status; explanatory variable; dependency ratio; agricultural productivity; household characteristic; household labor; working population; farm earnings; single source; wage income; skilled employment; rural farm; employment growth; transfer income; household level; individual characteristic; poverty headcount; farm economy; Labor Market; employment share; recent years; female workers; household livelihood; livelihood source; skilled job; rural livelihood; rural woman; zero income; sectoral distribution; gender difference; missing value; transport activity; regression model; machine operator; sales worker; support worker; beverage manufacturing; descriptive statistic; multiple sources; unskilled occupations; unskilled worker; new job; multivariate analysis; independent variable; livelihood choice; differences in results; low education; statistical relationship; population characteristic; human capital; random utility; linear function; discrete value; average yield; region-specific characteristics; diversified portfolio; diversification strategy; greater access; farm household; land holding; education category; labor supply; farm opportunity; manufacturing jobs; income earner; Real estate; health activities; summary statistic; input cost; self-employment income; negative incomes; land area; off-farm employment; productivity level; average household; low share; wage laborer; income account; subsidiary right; noncommercial purposes; employment opportunity; employment opportunities; expected return; risk exposure; labor shortage; imperfect market; livestock activities; income growth; push factor; factor return; adverse shock; liquidity constraint; transaction cost; pull factor; strategic complementarity; comparative advantage; interior design; tourism industry; welfare improvement; subsistence agriculture; input supply; asset base



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The Rural Nonfarm Sector and Livelihood Strategies in Sri Lanka : Background Report to Sri Lanka Poverty Assessment (English). Washington, D.C. : World Bank Group.