Abstract

Given the critical importance of the non-farm sector in rural Bangladesh, this paper examines the comprehensive effects of non-farm incomes on poverty reduction, namely, household production and consumption. The study was based on the original field survey with data from about 175 small households in advanced villages of Bangladesh. Standard micro-econometric techniques were used for the empirical analyses. The study found that the small households in advanced villages were in a stage that their non-farm incomes did not contribute significantly to their household production for either farm or non-farm and food consumption (calorie adequacy); and accordingly, these could be spent on non-food consumption. Finally, the study found that the overall non-farm income significantly mattered for reducing income poverty but could be still low to be realized in reducing education poverty. However, among the non-farm income components, while out-country remittance and non-farm self-employment incomes were more income poverty (incidence and gap) reducing compared to non-farm wage and in-country remittance incomes, the remittance incomes (both in-country and out-country) were reducing the severity of education poverty. Thus, the qualitative diversification of the small household workers and productive use (preferably in farm/non-farm production and demand driven education) of non-farm incomes deserved special attention.

Key words: Non-farm incomes, household economy, calorie adequacy, income poverty, education poverty, advanced villages, instrumental variable.