What Determines the Choice Between Farm and Nonfarm Employments in the Rural Bangladesh?

Abstract

With a small geographic size and huge population, employment generation for all economically active population is a major challenge in Bangladesh. Though agriculture has been the major employment generating sector, the rural economy in Bangladesh has been experiencing a transition over the past two decades. While unpaid family work in the rural areas is still highly farm-based, paid employment is mainly experiencing the transition, shifting more towards the nonfarm activities. World Bank (Summary report. Vol. 1 of Bangladesh—Promoting the rural non-farm sector in Bangladesh, World Bank, Washington, DC, 2004) reported that the rural nonfarm sector in Bangladesh accounted for about 40% of rural employment during early 2000s. Recent labor force surveys reveal some strong evidence of growth in the rural nonfarm economy. The growth of the rural nonfarm sector is very evident, because, with the limited arable land and intensification of the ones that are available reaching its peak, agricultural sector is least likely to absorb the growing rural labor force. With these contexts in frame, the current paper provides an overview of the potential determinants of the nonfarm participation in rural Bangladesh, and makes a systematic analysis of the determinants of employment-switch between farm and nonfarm sectors in rural Bangladesh. In this paper, we use data from the Household Income and Expenditure Surveys (HIES) of Bangladesh Bureau of Statistics (BBS) as the HIES data provides detailed household-level socioeconomic information, which is helpful for such analysis.