Non-farm Entrepreneurship Research Articles

Households’ entry into non-farm entrepreneurship and the market exit of enterprises in rural Ethiopia

Purpose This paper examines household and community characteristics that influence the entry of rural households into non-farm entrepreneurship and investigates the various factors that influence the market exit of non-farm enterprises (NFEs).Design/methodology/approach The authors use data from three rounds (2011/12, 2013/14 and 2015/16) of the World Bank’s Living Standards Measurement Study – Integrated Surveys on Agriculture (LSMS-ISA). The authors employ panel logit and multilevel logit models to examine the probability of opening one or more enterprises and the enterprise exit rates.Findings Results indicate that the likelihood of starting a NFE is positively associated with primary education attainment, access to credit, experiencing idiosyncratic shocks and availability of formal financial institutions. Age, higher education attainment and rising farm input prices constrain entry into non-farm entrepreneurship. The enterprise exit rate is negatively associated with small-town residence, wealth, access to tar/gravel roads and cellphone communication.Practical implications Policymakers and administrators should strive to address the challenges that communities face in transportation, communication and financial services. Policies aimed at stabilizing prices and increasing access to mobile communication, primary education and road infrastructure could help expand the rural non-farm sector.Originality/value Previous studies primarily examined the determinants of participation in NFEs at a given time using cross-sectional data. The current study uses panel data to study the dynamics of NFE ownership by investigating households’ decisions to enter into or exit from the sector.Peer reviewThe peer review history for this article is available at https://publons.com/publon/10.1108/IJSE-09-2022-0611

Non-farm entrepreneurship, caste, and energy poverty in rural India

This study examines how non-farm entrepreneurship influences rural household energy poverty and explores caste-based heterogeneities in outcomes in India. The study used different quasi-experimental econometric methods to analyse panel data from the waves 1 and 2 (2015 and 2018) of the Access to Clean Cooking Energy and Electricity Survey of States (ACCESS) in India. The overall results across all estimation methods show that households' engagement in non-fam entrepreneurship significantly contributes to a reduction in their energy poverty levels and the probability of being energy poor. The sizes of the reduction vary across the four castes (General Caste, Scheduled Tribe, Scheduled Caste, and Other Backward Caste). The energy poverty reducing effect of non-farm entrepreneurship is particularly high among members of the Scheduled Tribe. Further mediation analyses reveal that non-farm entrepreneurship potentially affects rural households' energy poverty through their accumulation of financial (savings) and durable assets which possibly enable them to access cleaner energy sources for lighting and cooking. We encourage governments to pay attention to policies that promote non-farm entrepreneurship which has the potential to enhance asset accumulation and reduce rural energy poverty in the process.

Non-farm Entrepreneurship, Caste, and Energy Poverty in Rural India

Non-farm Entrepreneurship, Caste, and Energy Poverty in Rural India

Short-run effects of grid electricity access on rural non-farm entrepreneurship and employment in Ethiopia and Nigeria

Empirical evaluation of the household-level economic effects of electricity access in rural regions has challenged researchers due to data scarcity issues and identification challenges. Previous studies provide mixed evidence depending on the context and the empirical approach adopted. Continued efforts towards a robust understanding of this linkage are necessary for guiding the design of rural electricity access and economic development policies. Here we carry out a difference-in-differences analysis with staggered treatment timing, revisiting prior work reporting short-run effects of rural electrification on household non-farm entrepreneurship and employment trends in Ethiopia and Nigeria between 2010–2015. Our results indicate that rural electrification considered alone was insufficient to trigger shifts in non-farm entrepreneurship and non-farm household employment outcomes in the 2–4 years following grid connection in either country. We do find some evidence in Nigeria of farm employment intensification over this short-term. Our work contributes to improving the understanding of the causal pathway in question while also highlighting the limitations of short-term survey datasets in pursuing this goal.

Nonfarm entrepreneurship, crop output, and household welfare in Tanzania: An exploration of transmission channels

AbstractThis study analyzes panel data from the Tanzania Living Standards Measurement Study‐Integrated Surveys on Agriculture by the World Bank to investigate the impact of nonfarm entrepreneurship as a nonfarm activity on the value of crop output and household welfare, and to explore the potential transmission channels among rural farm households. Using a dynamic panel model to address endogeneity, our results reveal that nonfarm entrepreneurship has a positive impact on the value of crop output and household welfare. Our findings suggest that income from nonfarm entrepreneurship may enhance crop output through crop production technology and credit access, and household welfare through an increase in consumption expenditure and food expenditure as potential transmission mechanisms. Policies that enhance nonfarm entrepreneurship may also reinforce crop production and the welfare of farm households and are thus imperative. We suggest that policies that boost nonfarm sector growth such as agro‐processing and agribusiness enterprise development might achieve the twin objectives simultaneously: enhancing crop production and household welfare [EconLit Citations: C33, D24, Q12, 012].

International remittances and nonfarm entrepreneurship among the left‐behind: Evidence from Nepal

AbstractNepal has one of the largest personal remittances‐to‐gross domestic product ratios globally, which raises questions regarding the role of remittances in key welfare–related outcomes among the left‐behind population. This paper assesses the impact of remittances from international migration on the left‐behind households’ engagement in nonfarm self‐employment and on the revenues of the nonfarm enterprises they operate. The empirical analysis is based on a Nepal household survey that includes an enterprise module for 2011 and on an instrumental variable‐tobit econometric specification. In accordance with Gronau's theoretical framework, remittances were found to discourage women's engagement in nonfarm self‐employment (disincentive effect), whereas there was no significant effect on men. Consequently, we find that the disincentive effect was sufficiently strong to exert a negative impact on the revenues of nonfarm enterprises operated by the left‐behind.

From subsistence farming to agribusiness and nonfarm entrepreneurship: Does it improve economic conditions and well-being?

To eradicate poverty, governments across developing countries have adopted programs to promote business ownership, with varying levels of success. The mixed success of such programs underscores the importance of local business and economic conditions. Yet, empirical evidence on how local context shapes outcomes of entrepreneurship-focused poverty initiatives is sparse. In this paper, we use data from the 2015 Smallholder Survey to examine the impact of farming as a business (agribusiness) and nonfarm entrepreneurship (NFE) on household income and economic well-being in Uganda. We find that, in comparison to subsistence farming, engaging in agribusiness and NFE boosts household income and economic well-being, especially in rural areas with high poverty rates. Our research contributes to the literature by offering new evidence on the efficacy of entrepreneurial initiatives in the specific context of a developing country with a large rural and agricultural economy. In terms of policy, our analysis provides support for the promotion of agribusiness and NFE initiatives to reduce poverty and overcome disparities between urban and rural settings.

Selection and Absolute Advantage in Farming and Entrepreneurship∗

Output per worker is lower in poor countries than in rich countries, and relatively more so in the agricultural sector. Sorting of heterogeneous workers can contribute to explain this fact if comparative and absolute advantage are aligned in agriculture, implying that average productivity in agriculture increases as the agricultural employment share decreases. We empirically investigate the correlation between comparative and absolute advantage using representative household-level panel data from four Sub-Saharan African countries. Around one third of households engage in both agriculture and non-farming entrepreneurship.We find that more productive farming households are more likely to also engage in non-farm entrepreneurship, allocate more hours to it if they do, and are more likely to enter it if not yet active. All three pieces of evidence imply that comparative and absolute advantage are negatively correlated – misaligned – in agriculture, casting doubt on the importance of selection as a root cause of the agricultural productivity gap.

Selection and Absolute Advantage in Farming and Entrepreneurship

Output per worker is lower in agriculture than in other sectors, and relatively more so in poor countries. Sorting of heterogeneous workers can contribute to explain this fact if comparative and absolute advantage are aligned in agriculture, implying that average productivity in agriculture increases as the agricultural employment share decreases. We empirically investigate the correlation between comparative and absolute advantage using representative household-level panel data from four Sub-Saharan African countries. We exploit information on households who engage in both agriculture and non-farm entrepreneurship -- about a third of the population. We find that more productive farming households are more likely to also engage in non-farm entrepreneurship, allocate more hours to it if they do, and are more likely to enter it if not yet active. All three pieces of evidence imply that comparative and absolute advantage are negatively correlated -- misaligned -- in agriculture, casting doubt on the importance of selection as a root cause of the agricultural productivity gap.

What if mothers are entrepreneurs? Non-farm businesses and child schooling in rural Ghana

While an important share of the rural population in Sub-Saharan Africa owns a non-farm enterprise (NFE), it is unclear how these businesses, especially among female owners, contribute to rural development. This study investigates the missing link between rural NFEs and children's education using nationally representative data for Ghana. After controlling for observed and (partially for) unobserved heterogeneity, using OLS and instrumental variable regressions with instruments that are highly relevant and plausibly exogenous, we find that secondary schooling is significantly higher among children whose mother engages in non-farm entrepreneurship. We find a significant positive correlation with Junior High School enrolment but not with Senior High School enrolment, which relates to lower expenses and a better spread in payment for Junior High School education. The link of mother's non-farm entrepreneurship with child secondary education is equally strong for boys and girls and for high- and low-educated mothers, and stronger for poorer households. While most of NFEs are small-scale and informal, our findings suggest that even these businesses can contribute to development. The results furthermore imply that NFEs entail the potential to stimulate child schooling among children of low-educated and poor mothers and thereby reduce inequality in rural education.

Non-farm entrepreneurship in rural sub-Saharan Africa: New empirical evidence

We report on the prevalence and patterns of non-farm enterprises in six sub-Saharan African countries, and study their performance in terms of labor productivity, survival and exit, using the World Bank’s Living Standards Measurement Study - Integrated Surveys on Agriculture (LSMS-ISA). Rural households operate enterprises due to both push and pull factors and tend to do so predominantly in easy-to-enter activities, such as sales and trade, rather than in activities that require higher starting costs, such as transport services, or educational investment, such as professional services. Labor productivity differs widely: rural and female-headed enterprises, those located further away from population centers, and businesses that operate intermittently have lower levels of labor productivity compared to urban and male-owned enterprises, or enterprises that operate throughout the year. Finally, rural enterprises exit the market primarily due to a lack of profitability or finance, and due to idiosyncratic shocks.

The Analysis of Non-Farm Entrepreneurship in Improving the Quality of Life in the Villages Case: Villages Located in Shandiz Area, Binaloud County

The Analysis of Non-Farm Entrepreneurship in Improving the Quality of Life in the Villages Case: Villages Located in Shandiz Area, Binaloud County

Determinants of Decision for Non-Farm Entrepreneurship By Women Farmers In Ikwuano LGA, Abia State

Recent years have witnessed numerous Government efforts to boost agricultural production in Nigeria. A key input to achieve this is credit. In the face of formal credit acquisition bottlenecks, there is the need to shift attention to non-farm entrepreneurship, as income made in this sector could be invested in agriculture. This study therefore evaluated determinants of decision for non-farm entrepreneurship by women farmers in Ikwuano Local Government Area of Abia State. The specific objectives of the study were to: describe the socio-economic characteristics of women farmers engaged in non-farm enterprise in the study area; determine factors that influence women decision to embark on non-farm enterprise in the study area; and identify problems constraining women from embarking on non-farm enterprise in the study area. A hree stage random sampling technique was adopted in the selection of 120 respondents for the study. Analytical tools utilized, were frequency distribution tables, percentages, means and probit regression model. The probit regression analysis revealed that age, household size, primary occupation, farm income, access to credit, farming experience and membership of cooperative societies were significant determinants of women farmers decision to embark on non-farm enterprise at varied signs and levels of significance. The women were constrained from embarking on non-farm business by lack of startup capital (43.33%), inadequate credit access (35.00), and land procurement barriers (31.67). In line with the findings of the study, it was recommended that the Land Use Act of 1978 should be fully implemented as it will ameliorate the persistent land procurement problem faced by women farmers in Nigeria. Key Words : Decision Determinant, Non-farm Entrepreneurship, Income Generation.

Non-Farm Entrepreneurship in Rural Africa: Patterns and Determinants

We are the first to provide a comparative empirical analysis of non-farm entrepreneurship in rural Africa, using the World Bank's unique LSMSISA dataset. This dataset covers six countries over the period 2005 to 2012. We find that rural enterprises tend to be small, informal household enterprises that provide predominantly goods and services to the local economy, and operate intermittently due to seasonality in farming. We furthermore establish that the likelihood of operating an off-farm enterprise depends on individual capabilities, household characteristics and institutional factors. While the results of some variables show consistency across the sample, we also find much heterogeneity, suggesting that rural entrepreneurship is also a response to country-level circumstances and policies. Although more than 50 years have passed since rural development was identified as a priority for African countries, rural entrepreneurship continues to fulfill mainly a risk-diversifying role. This may suggest that policies to foster effective rural-urban migration and wage employment in rural areas, have largely failed in Africa.

Gender and Rural Non-Farm Entrepreneurship

Despite their increasing prominence in policy debates, little is known about gender inequities in non-agricultural labor market outcomes in rural areas. Using matched household-enterprise-community data sets from Bangladesh, Ethiopia, Indonesia and Sri Lanka, this paper documents and analyzes gender differences in the individual portfolio choice and productivity of non-farm entrepreneurship. Except for Ethiopia, women are less likely than men to become nonfarm entrepreneurs. Women's nonfarm entrepreneurship isn't strongly correlated with household composition or educational attainment, but is especially prevalent amongst women who are the head of their household. Female-led firms are much smaller and less productive on average, though gender differences in productivity vary dramatically across countries. Mean differences in log output per worker suggest that male firms are roughly 10 times as productive as female firms in Bangladesh, three times as those in Ethiopia and twice as those in Sri Lanka. By contrast, no significant differences in labor productivity were detected in Indonesia. Differences in output per worker are overwhelmingly accounted for by sorting by sector and size. They can't be explained by differences in capital intensity, human capital or the local investment climate, nor by increasing returns to scale.

The Place-Based Structural Determinants and Effects of Self-Employment

This study expands on previous research by including a wider set of local economic and community factors affecting non-farm entrepreneurship or self-employment than have previously been considered. These factors affect both the rates of and returns to self-employment in US counties. Counties in which more residents voted for the Republican presidential candidate in 2000 had higher rates of self-employment and returns to self-employment in these counties also were higher. This result is attributed to a stronger entrepreneurial spirit and fewer rules and regulations to thwart self-employment efforts. While the presence of Wal-Mart stores depresses self-employment rates it may also raise the returns to self-employment. This supports the Schumpeterian prediction of creative destruction whereby the surviving self-employed are more productive as a result of competitive pressures. Local business service providers allow the self-employed to out-source non-core functions, raising their profitability. Temporary help and child daycare services are associated with both higher rates of self-employment and greater returns. Childcare services are not typically viewed as a constraint to expanded entrepreneurship but warrant greater attention. Couriers and messengers, and office supply and stationary stores are associated with significantly higher earnings from self-employment. The presence of junior colleges; business schools and computer and management training establishments; and technical and trade schools is associated with higher returns to self-employment. An opportunity clearly exists for expanding the roles of colleges, universities and professional schools in stimulating local rates of and returns to entrepreneurship.

Entrepreneurship Selection and Performance: A Meta-Analysis of the Impact of Education in Developing Economies

This meta-analytical review of empirical studies of the impact of schooling on entrepreneurship in selection and performance in developing economies looks at variations impact across specific characteristics of the studies. A marginal year of schooling in developing economies raises enterprise income by an average of 5.5 percent, which is close to the average return in industrial countries. The return varies, however, by gender, rural or urban residence, and the share of agriculture in the economy. Furthermore, more educated workers typically end up in wage employment and prefer nonfarm entrepreneurship to farming. The education effect that separates workers into self-employment and wage employment is stronger for women, possibly stronger in urban areas, and also stronger in the least developed economies, where agriculture is more dominant and literacy rates are lower.

Entrepreneurship Selection and Performance: A Meta-analysis of the Impact of Education in Less Developed Countries

This paper provides an analytical review of empirical studies into the impact of schooling on entrepreneurship selection and performance in less developed countries. We analyze the variation of this impact across various characteristics of studies. We find that a marginal year of schooling raises enterprise income by an average of 5.5 percent, which is closely similar to the average return in industrial countries. The return varies by gender, rural/urban residence, and the share of agriculture in the economy. Furthermore, more educated workers typically end up in wage employment but also prefer non-farm entrepreneurship to farming. The education effect that separates workers from self-employment into wage employment is stronger for women, possibly stronger in urban areas, and also stronger in the least developed economies where agriculture is more dominant and literacy rates are lower.