Publication: The Rural Nonfarm Sector and Livelihood Strategies in Sri Lanka: Background Report to Sri Lanka Poverty Assessment
Loading...
Published
2021-10-01
ISSN
Date
2021-11-09
Author(s)
Editor(s)
Abstract
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.
Link to Data Set
Citation
“2021. The Rural Nonfarm Sector and Livelihood Strategies in Sri Lanka: Background Report to Sri Lanka Poverty Assessment. © World Bank. http://hdl.handle.net/10986/36513 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Poverty Decline, Agricultural Wages, and Non-Farm Employment in Rural India 1983–2004(2009-03-01)The authors analyze five rounds of National Sample Survey data covering 1983, 1987/8, 1993/4, 1999/0, and 2004/5 to explore the relationship between rural diversification and poverty. Poverty in rural India declined at a modest rate during this period. The authors provide region-level estimates that illustrate considerable geographic heterogeneity in this progress. Poverty estimates correlate well with region-level data on changes in agricultural wage rates. Agricultural labor remains the preserve of the uneducated and also to a large extent of the scheduled castes and scheduled tribes. Although agricultural labor grew as a share of total economic activity over the first four rounds, it had fallen back to the levels observed at the beginning of the survey period by 2004. This all-India trajectory masks widely varying trends across states. During this period, the rural non-farm sector grew modestly, mainly between the last two survey rounds. Regular non-farm employment remains largely associated with education levels and social status that are rare among the poor. However, casual labor and self-employment in the non-farm sector reveal greater involvement by disadvantaged groups in 2004 than in the preceding rounds. The implication for poverty is not immediately clear - the poor may be pushed into low-return casual non-farm activities due to lack of opportunities in the agricultural sector rather than being pulled by high returns offered by the non-farm sector. Econometric estimates reveal that expansion of the non-farm sector is associated with falling poverty via two routes: a direct impact on poverty that is likely due to a pro-poor marginal incidence of non-farm employment expansion; and an indirect impact attributable to the positive effect of non-farm employment growth on agricultural wages. The analysis also confirms the important contribution to rural poverty reduction from agricultural productivity, availability of land, and consumption levels in proximate urban areas.Publication Sri Lanka : Promoting Agricultural and Rural Non-farm Sector Growth, Volume 1. Main Report(Washington, DC, 2003-02-26)Economic development has brought about, the decline in contribution of the agricultural sector to the economy of Sri Lanka, and, consistent with this economic transformation, the structure of employment also changed. Thus, as labor migrates away from agriculture, the productivity, for those who remain in the land, needs to increase significantly. This report examines the constraints to promoting more rapid agricultural, and rural non-farm sector growth, and, reviews the recent performance of the agricultural, and rural non-farm sectors, in particular the non-plantation agricultural sector; scrutinizes the major policy, and regulatory barriers, that hinder a sustained growth in rural areas; and, proposes options for improvement in the key areas. A critical step to achieve this sector growth, and meet the changing demands of the overall economy, is the need to formulate, and implement a renewed rural development strategy, that builds on synergies in the agricultural, and non-farm sectors. This integrated rural development framework becomes an instrument that can complement a sustained growth in the non-farm sector, namely through the performance of public agricultural research, and extension systems, formulated under an updated National Agricultural Strategy and Policy, that modernizes technology policies, and regulations, commits to stabilizing tariff policies, and similarly, commits to implementing policy reforms in land administration, water, labor, commodity marketing, and the commercial private sector. Nonetheless, the report further suggests that prior to implementing this strategy, the Government should formulate a Poverty Reduction Strategy, a critical vehicle for completing the rural strategy framework.Publication Priorities for Sustainable Growth : A Strategy for Agriculture Sector Development in Tajikistan, Technical Annex 6. Rural Poverty(Washington, DC, 2012)Agriculture sector growth has made a powerful contribution to post-war economic recovery in Tajikistan, accounting for approximately one third of overall economic growth from 1998 to 2004. Sector output increased by 65 percent in real terms during this period, and has now returned to the level extant at independence in 1990. Total Factor Productivity (TFP) has also increased, by 3 percent per year. Despite this progress, there is legitimate concern that this growth is unsustainable. Evidence suggests that it has been driven largely by the external factors noted above, rather than substantive changes to resources, incentives and the behavior of factor and commodity markets. First, an extensive program of policy reform, particularly in the area of land ownership, has yet to make a substantial impact on the incentive structure for agricultural workers cultivating the majority of arable land. Second, sustainable growth requires positive net investment. Third, commodity markets remain weak, with a limited capacity to translate increased demand into improved production incentives. And fourth, growth in crop production has been largely driven by low value food and cereal crops. A sustainable increase in access to rural finance will require much greater emphasis on the development of alternative sources of finance for all of agriculture, in addition to resolution of the cotton debt crisis. The capacity for agricultural loan appraisal and management also needs to be strengthened, new collateral instruments introduced and new loan products developed, which are suited to agriculture in general and small-scale farmers in particular.Publication Household Enterprises in Sub-Saharan Africa : Why They Matter for Growth, Jobs, and Livelihoods(World Bank, Washington, DC, 2012-08)Despite 40 percent of households relying on household enterprises (non-farm enterprises operated by a single individual or with the help of family members) as an income source, household enterprises are usually ignored in low-income Sub-Saharan-African development strategies. Yet analysis of eight countries shows that although the fast growing economies generated new private non-farm wage jobs at high rates, household enterprises generated most new jobs outside agriculture. Owing to the small size of the non-farm wage job sector, this trend is expected to continue for the foreseeable future. This analysis of enterprises and their owners shows that although it is a heterogeneous sector within countries, there are many similarities across countries, indicating that cross-country learning is possible. For labor force participants who want to use their skills and energy to create a non-farm income source for themselves and their families, household enterprises offer a good opportunity even if they remain small. The paper finds that given household human capital and location, household enterprise earnings have the same marginal effect on consumption as private wage and salary employment. The authors argue that household enterprises should be seen as part of an integrated job and development strategy.Publication The Rural Investment Climate : Analysis and Findings(Washington, DC, 2008)Interest in investment climates has emerged relatively recently. In the 1960s and 1970s, governments in many countries believed they should play a direct role in rural credit, input supply, production, trade, transport, distribution, and even marketing. However, in the 1980s and 1990s, government-dominated systems fell into disgrace because of poor performance. For the rural sector, the primary focus had traditionally been on agriculture, particularly commercial agriculture and agribusiness, which were perceived to be the main drivers of rural growth. This study's essential findings and policy implications are organized into the following six chapters. Annexes provide supporting material. Chapter two presents an overview of related work and of the literature; it also describes the subsequent chapters' methodological framework, including new ways of addressing questions of endogeneity in these kinds of surveys while seeking to isolate cause and effect. Chapter three, by applying econometric analysis, measurably extends the examination of enterprise performance and investment climate constraints initiated in RIC1 (first rural investment climate). A rigorous examination of enterprise dynamics and entrepreneurial choice is developed in chapter four. Aiming to highlight the differing effects on Rural Nonfarm Enterprises (RNFEs), chapter five draws together the main implications RIC2 findings on the rural investment climate in the three country pilots. Community-level influences also matter, and chapter six examines how the local IC and other community characteristics shape the environment for economic activity. Conclusions and recommendations appear in chapter seven, including suggestions for using RIC results for policy reform and for targeting the rural public expenditures needed to foster improvements in the rural investment climate. The annexes describe the databases employed and the methodologies used in the study, as well providing detailed regression results.
Users also downloaded
Showing related downloaded files
Publication Global Economic Prospects, June 2025(Washington, DC: World Bank, 2025-06-10)The global economy is facing another substantial headwind, emanating largely from an increase in trade tensions and heightened global policy uncertainty. For emerging market and developing economies (EMDEs), the ability to boost job creation and reduce extreme poverty has declined. Key downside risks include a further escalation of trade barriers and continued policy uncertainty. These challenges are exacerbated by subdued foreign direct investment into EMDEs. Global cooperation is needed to restore a more stable international trade environment and scale up support for vulnerable countries grappling with conflict, debt burdens, and climate change. Domestic policy action is also critical to contain inflation risks and strengthen fiscal resilience. To accelerate job creation and long-term growth, structural reforms must focus on raising institutional quality, attracting private investment, and strengthening human capital and labor markets. Countries in fragile and conflict situations face daunting development challenges that will require tailored domestic policy reforms and well-coordinated multilateral support.Publication Doing Business 2020(Washington, DC: World Bank, 2020)Doing Business 2020 is the 17th in a series of annual studies investigating the regulations that enhance business activity and those that constrain it. It provides quantitative indicators covering 12 areas of the business environment in 190 economies. The goal of the Doing Business series is to provide objective data for use by governments in designing sound business regulatory policies and to encourage research on the important dimensions of the regulatory environment for firms.Publication Making Difficult Choices(World Bank, Washington, DC, 2008)After decades of war, with a dilapidated infrastructure and millions of people dead, wounded or displaced, Vietnam could have been considered a hopeless case in economic development. Yet, it is now about to enter the ranks of middle-income countries. The obvious question is: How did this happen? This paper goes one step further, asking not which policies were adopted, but rather why they were adopted. This question is all the more intriguing because the process did not involve one group of individuals displacing another within the structure of power. To answer this question, the paper relies on the insights of those who were actually involved in the economic experiments, conceptual discussions, and political maneuvering that led to the adoption of key reforms. Especially, it builds on a series of long and regular conversations with H. E. the late Vo Van Kiet, one of Vietnam's leading figures. In doing so, it brings into the open the inside story of Doi Moi, a process that is not known by outsiders and remains opaque to most Vietnamese. The relevance of this exercise is not merely historical. Understanding how reforms were engineered may yield valuable lessons for other developing countries. It is also relevant for Vietnam, as two decades of rapid economic growth have resulted in dramatic changes in its economy and society. While praising the decision-making processes that allowed Vietnam to successfully emerge from poverty, the paper also explores the adjustments that could be needed for it to become an industrial country.Publication Global Economic Prospects, January 2025(Washington, DC: World Bank, 2025-01-16)Global growth is expected to hold steady at 2.7 percent in 2025-26. However, the global economy appears to be settling at a low growth rate that will be insufficient to foster sustained economic development—with the possibility of further headwinds from heightened policy uncertainty and adverse trade policy shifts, geopolitical tensions, persistent inflation, and climate-related natural disasters. Against this backdrop, emerging market and developing economies are set to enter the second quarter of the twenty-first century with per capita incomes on a trajectory that implies substantially slower catch-up toward advanced-economy living standards than they previously experienced. Without course corrections, most low-income countries are unlikely to graduate to middle-income status by the middle of the century. Policy action at both global and national levels is needed to foster a more favorable external environment, enhance macroeconomic stability, reduce structural constraints, address the effects of climate change, and thus accelerate long-term growth and development.Publication Business Ready 2024(Washington, DC: World Bank, 2024-10-03)Business Ready (B-READY) is a new World Bank Group corporate flagship report that evaluates the business and investment climate worldwide. It replaces and improves upon the Doing Business project. B-READY provides a comprehensive data set and description of the factors that strengthen the private sector, not only by advancing the interests of individual firms but also by elevating the interests of workers, consumers, potential new enterprises, and the natural environment. This 2024 report introduces a new analytical framework that benchmarks economies based on three pillars: Regulatory Framework, Public Services, and Operational Efficiency. The analysis centers on 10 topics essential for private sector development that correspond to various stages of the life cycle of a firm. The report also offers insights into three cross-cutting themes that are relevant for modern economies: digital adoption, environmental sustainability, and gender. B-READY draws on a robust data collection process that includes specially tailored expert questionnaires and firm-level surveys. The 2024 report, which covers 50 economies, serves as the first in a series that will expand in geographical coverage and refine its methodology over time, supporting reform advocacy, policy guidance, and further analysis and research.