Impact of Rural Infrastructure on Farm and Non-Farm Enterprise Choice and Income in Bangladesh

Abstract

Impact of rural infrastructure on economic development is indirect and complex. The present study jointly determines the impact of rural infrastructure on the decision to choose between farm and non-farm enterprises vis-à-vis income by Bangladeshi rural households (4,195 households from 139 villages) using a bivariate Tobit model. The model diagnostic reveals that the decision to choose enterprises is significantly correlated, justifying use of a bivariate approach. Rural infrastructure has a significant but opposite impact on enterprise choices vis-à-vis income. Other major determinants with varying level of influences are farm size, livestock resources, education, farming experience and household assets. However, female-headed households are doubly disadvantaged as they have failed to participate in both enterprises and consequently earned significantly less. Policy implications include investment in rural infrastructure, irrigation, rural electrification, education, livestock resources, tenurial reforms, as well as targeted approach to promote welfare of the female-headed households, e.g., creation of a hired labor market for females.