Determinants of Farm Households Participation in the Rural Non farm Labor Markets in Rwanda: The Case of Gisagara District

Abstract

Development researchers and policymakers in developing countries, particularly in Rwanda, are increasingly emphasizing the role of rural nonfarm (RNF) sector development in resolving the meso-paradox, defined as the failure of development policies to spur development at the meso-level. Despite Rwandan Government's efforts to stimulate growth of the RNF sector in order to improve the lot of farming communities, recent studies have found that participation in this sector remains low compared to other developing and transition countries. Although they argued that this low participation rate could be attributed to the 1994 civil war, questions remains as to whether other factors are constraining its expansion. This study intends to fill this knowledge gap by primarily analyzing micro-level factors driving participation in RNF labor market. It focuses on Gisagara District of the Southern Province for its agroclimatic and demographic characteristics which are representative of the other regions of the country. The study uses the labor supply theory to investigate the role of three categories of micro-level factors on household's participation in RNF employment namely, household-specific factors, farm-specific factors, and institutional factors. Economic and demographic factors are included as conditioning factors in the empirical model. It uses Cragg's Double Hurdle model to test the effect of these factors on farm household's decision to participate in RNF employment and the intensity of participation, once the participation decision is made. The data was generated through personal interviews of 241 farm households drawn using multistage stratified random sampling technique, where respondents are stratified by area's potentiality In RNF employments. The empirical analysis leads to several interesting results. As hypothesized, the study reveals that household-specific factors influence the decision to engage in RNF activities. Notably, we find that households headed by women and those having more adults and educated workers are more likely to participate in RNF employment. Further, we find that households with young and educated members tend to allocate more work hours in the RNF activities. This study reveals also that farm-specific factors such as landholding and farm incomes have significant effects on the probability to take up nonfarm activities. On institutional factors, the results suggest that the extent of participation in local community organizations (e.g., groups and associations) increases the probability of participation in RNF employment. These findings imply that policies aimed at promoting rural development through RNF sector needs to consider the human, physical and social capital endowments of the communities that are targeted. The government should direct more attention on the promotion of education to provide skills needed by RNF labor markets, and social networking among rural farming communities. The latter result supports the ongoing effort by the government to implement social networks through agglomeration settlement schemes popularly known as umudugudu program.