Distributive impacts of non-farm income on output and farm income of cassava farmers in Southwestern Nigeria

Abstract

Non-farm income is a major source of income, along with farming for most rural households, that seems to offer a pathway out of poverty. It has gained prominence in recent times as an alternative strategy. However, it is often not clear how non-farm income can contribute to farm output and income because empirical results from existing literature remain somewhat ambiguous. Therefore, more robust research is needed to understand what conditions lead to what outcomes and to identify appropriate policy responses. We extend the previous literature in the direction of understanding more finely the potential impact of non-farm income on output and farm income distributions, applying a novel approach, IVQTEs, for the first time in this context. In this paper, we analyzed the drivers of non-farm income as an alternative strategy, and its distributive impacts on cassava farmers' output and farm income in Southwestern Nigeria. A multistage sampling procedure was employed to select 300 cassava farmers for the study. Data were analysed using the novel nehurdle estimation procedure of the double hurdle model. Our methodology of using an instrumental variable quantile treatment effect model (IVQTE) explicitly demonstrates the impact of non-farm income on farm output and income distribution at different levels. The first hurdle (Probit regression) of nehurdle results show that age, household size, years of education, years of experience, farm size, and access to credit may likely influence the decision to participate in non-farm income works; while, in the second hurdle, household size, age, years of education, farm size, gender, asset ownership, cooperative membership are the significant factors that may likely influence the amount realized from non-farm income works. Our results reveal a positive marginal impact of non-farm income at all quantiles of the conditional distribution of cassava farmers’ output and farm income, with the impact being the lowest at the lowest quantile (25th quantile) and increased across the other quantiles. In this regard, the study suggests that the creation of job opportunities outside farming will supplement on-farm works and enhance household's income. This study also suggests that measures such as education, extension services and cooperative societies, to enhance participation in non-farm income works, will spur the rural economy in Nigeria and other developing countries.