Author
Sohail JAVED* and Fouzia SOHAIL**
Abstract
Given the employment trends (slow growth) in the agriculture sector, researchers and policymakers have started evaluating the role of the non-farm sector in sustaining employment in the rural economy. Apart from participation in non-farm activities, in Pakistan, as reported in the Household Income and Expenditure Survey (HIES) 2018-19, around 21.7 per cent of households exclusively reported operating non-farm enterprises (NFEs). NFEs support farm income, smooth seasonal fluctuation in income, and mitigate labour market uncertainties by absorbing surplus labour. In this connection, the paper aims to explore the opportunities available to the rural labour force within the non-farm sector as the growth in the agriculture sector remains stagnant and fails to absorb the growing labour force. The research in the area mainly remains focused on exploring the effect of non-farm activities while neglecting the role of non-farm enterprises that not only generate substantial income for poor households but also create employment opportunities in the rural areas of Pakistan. The paper investigates the role of NFEs in generating employment and income by employing nationally representative data of HIES conducted in 2018-19, and by employing the Heckman Selection model. The results suggest that rural NFEs make positive contributions in rural areas by generating employment and income. Explicitly, NFE on average, generate employment for 59 per cent of the working people in households located in rural areas of Pakistan and generates a monthly net income of around Rs. 140,264 at all Pakistan level and Rs. 98,828 for the rural areas. Considering the NFEs operating in the rural areas only, results reveal that net income and gross profit generated by the NFEs operating in Khyber Pakhtunkhwa and Punjab are higher than those operating in the rural areas of Sindh and Balochistan. Further, results based on the Heckman Selection approach confirm that after controlling for non-random self-selection bias into entrepreneurship, socioeconomic characteristics function as significant determinants of total income among households engaged in non-farm enterprise ownership.
