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Off-Farm Employment and Income Inequality: The Implication for poverty Reduction Strategy


<p><em>Using micro data collected from a sample of households in Tigray, Northern Ethiopia, the contributions of farm and off-farm income sources to the over all income inequality is assessed. Some interesting results are obtained. Due to entry barriers, relatively wealthy farm households dominate the most lucrative rural non-farm activities such as masonry, carpentry and petty trade. This has widened the income inequality in rural areas. The main sources of the inequality are non-farm activities such as non-farm skilled wage work and non-farm self-employment. The present public work program is unequally distributed in favors of the poor and hence reduces the income inequality that exists in the rural areas. If off-farm employment is going to be the main source of income inequality in rural areas, its role in the alleviation of poverty will be very limited. Therefore, policy reform is required to handle the redistribution effect of expanding economic activities into off-farm employment. In order to reduce the income inequality effect of diversifying income sources into non-farm activities, the underlying factors that hinder participation in non-farm activities such as credit constraints and lack of skill may have to be improved through the provision of credit and technical training in favor of the poor. Public provision of information on the labor market could be helpful to reduce the transaction cost of searching for non-farm jobs. Improving rural infrastructure can also reduce spatial income inequality.</em></p>

Corporate Author: 
Ethiopian Economic Association/Ethiopian Economic Policy Research Institute (EEA/EEPRI)
Ethiopian Economic Association (EEA)
Primary Descriptors: 

<p>Income diversification; off-farm employment</p>

Secondary Descriptor: 

<p>entry barrier; policy reform</p>

Cataloge Date: 
Broad Subject heading: 
income inequality
Call Number: 
330.05 ETH JOU
Serial Key Title: 
Ethiopian Journal of Economics
Publication catagory: 
Content type: 
April, 2000
Publication date: 
2013-03-02 00:00:00
Forum or Discussion date: 
2013-03-02 00:00:00
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Serial (Journal)
Current frequency: