An Investigation of Employment Choice in the Rural Sector of Pakistan

Abstract

Agricultural sector remained the focus of policy makers in an attempt to improve the rural incomes and reducing rural poverty among highly populated but less developed countries. The paper analyzes the workers’ choice between farm and nonfarm sectors in the rural sector. The study provides a theoretical framework where the employment decision of rural household member in the farm and nonfarm sectors depends on its physical assets including landholding and human capital development. The empirical analysis uses data for Pakistan obtained from PIHS 2001-02 and PSLM 2010-11. The results of the empirical model show that landholding is the major factor that drives the individual towards the farm activity while, education and public policy incentives including connectivity, market access and information spur the nonfarm employment. The findings of the study favor the development of nonfarm sector in order to cope with excessively increasing number of rural semi-skilled young workers. The findings suggest that focus of the policy should be on education and training to provide an enabling environment for sustained earnings of individuals. Nonfarm sector employment may ensure sustainable income of the rural labor as well as production of exportable surplus from rural to urban areas. This is inevitable due to poor economic conditions of rural workers and limited absorption capacity of farm and the urban job markets in the country.