Directory UMM :Data Elmu:jurnal:UVW:World Development:Vol29.Issue3.2001:
World Development Vol. 29, No. 3, pp. 467±480, 2001
Ó 2001 Elsevier Science Ltd. All rights reserved
Printed in Great Britain
0305-750X/01/$ - see front matter
www.elsevier.com/locate/worlddev
PII: S0305-750X(00)00113-3
Income Strategies Among Rural Households in
Mexico: The Role of O-farm Activities
ALAIN DE JANVRY and ELISABETH SADOULET
University of California at Berkeley, USA
Summary. Ð O-farm activities generate on average more than half of farm households' incomes in
the Mexican ejido sector. Participation in these activities helps reduce poverty and contributes to
greater equality in the distribution of income. This paper analyzes the determinants of access to ofarm sources of income across households. We ®nd that education plays a major role in accessing
better remunerated nonagricultural employment. Adults of indigenous ethnic origin suer from an
educational lag and have less access to o-farm nonagricultural employment than non-indigenous
adults at identical educational levels. The regional availability of o-farm employment strongly
aects participation. In addition, women are dierentially limited by distance to urban centers in
their ability to gain o-farm employment. Ó 2001 Elsevier Science Ltd. All rights reserved.
Key words Ð Mexico, rural households, income, o-farm employment, education, ethnicity
1. NEW APPROACHES TO RURAL
POVERTY REDUCTION
Worldwide, the rural sector harbors the vast
majority of the poor, likely accounting for
more than 70% of the total (World Bank,
1999). Even in countries as highly urbanized as
Mexico, where 75% of the population is urban,
rural poverty still represents 32% of total
poverty and 46% of extreme poverty (ECLAC,
1999). With many of the immigrants from rural
areas adding to the ranks of the urban poor, the
contribution of rural poverty to total poverty is
far greater than these percentages indicate
(Ravallion, 2000). Reducing rural poverty has
for this reason been a long-standing concern,
motivating an array of initiatives by governments,
nongovernmental
organizations
(NGOs), and international development agencies. The traditional approach has been
through redistributive land reforms and integrated rural development programs to increase
the productivity in agriculture of the assets
controlled by the rural poor. In general, integrated rural development programs, focused on
agriculture as the solution to rural poverty and
on the role of the government in delivering
services to enhance productivity, have met with
limited success and have not been sustainable
once government subsidies were removed
(World Bank, 1997). The approach also
underestimated the great degree of heteroge467
neity in asset positions across households and
the multiplicity of activities in which they are
engaged to generate income. In particular, ofarm activities are typically pursued by a
majority of the rural poor, both because they
lack access to sucient land to make agriculture a viable income strategy, and because
market failures for credit and insurance push
them into o-farm activities to diversify their
risks and seek sources of liquidity to be used in
agriculture.
Failures of the integrated rural development
approach, and deep changes in the context
where rural development is being pursued
(typically including trade liberalization,
descaling of public subsidies, elimination of
parastatal services to agriculture, political
democratization, decentralization of governance, the proliferation of civil society organizations, and ideological shifts toward greater
recognition of the role of markets and the
importance of competitiveness for peasant
households), have led to experimenting with a
widely dierent approach to rural development, characterized by the roles of decentralization, local organizations, participation, and
a demand-driven approach to the allocation of
public resources (de Janvry et al., forthcoming). A distinguishing feature of this new
approach is that it takes a comprehensive view
of the multiplicity of sources of income
households are relying upon in a particular
468
WORLD DEVELOPMENT
regional setting. In so doing, detailed analyses
of sources of income for rural households have
revealed the tremendous importance of ofarm, and among those, nonagricultural sources of employment and income (Reardon et al.,
1998). Promoting the generation of o-farm
income-earning opportunities and seeking to
enhance access for the rural poor to these
sources of income is thus a particularly
important aspect of this new approach to rural
development. Gaining a good understanding of
the determinants of participation in o-farm
activities and of the levels of income achieved
in these activities by dierent categories of farm
households is thus essential for the design of
the new approach to rural development and the
focus of this paper.
We analyze here the income strategies of
households in the Mexican ejido sector. The
ejido sector was created by the sweeping land
reform that followed the Mexican revolution of
1910. Land in that sector was allocated to
peasant communities called ejidos. Today, the
ejido sector contains approximately 60±65% of
the rural population, half of the country's
agricultural land, and also half of the irrigated
area (de Janvry et al., 1997). It is a major
reservoir of rural poverty, and consequently
has been the focus of rural development eorts.
Mexico is at the forefront of the new approach
to rural development, in particular through the
ambitious Pronasol (Cordera & Vanegas, 1999)
and Progresa (Scott, 1999) programs.
In the ejido population, all households are
landed as a result of allocations through the
land reform (Lamartine Yates, 1981). They
have access to a plot of land in usufruct cultivated individually, and to common property
resources from which extraction is generally
individual (grazing, forest products) and
sometimes collective (social forestry). Because
of incomplete property rights, the ejido sector is
severely constrained in accessing commercial
credit. This may induce these households to
seek liquidity for farm inputs and investments
by participating in o-farm activities as a
complement to their farm activities. At the
same time, as a consequence of structural
adjustment policies, public services to the sector
have been curtailed. As a consequence, the
pro®tability of agriculture has been held low,
also inducing participation in o-farm activities, but this time as a substitute for farm
incomes.
The data we use come from a nationwide
survey of the ejido sector conducted in 1997 by
the Mexican Ministry of Land Reform and the
World Bank (World Bank, 1998). The survey is
representative of the ejido sector at both the
national and the state levels. It consists in a set
of 250 ejido-level and 928 ejidatario-level
observations within the selected ejidos.
In this paper, we analyze the importance of
o-farm activities in these households' income
strategies. The questions of interest in analyzing the role of o-farm incomes are the
following: (a) Can o-farm activities substitute
for low access to land in helping households
generate income, and do o-farm incomes help
redress income inequality among ejidatarios?
(b) On the demand side, what are the determinants of individual participation in o-farm
activities and of the household levels of income
derived from each of these activities? (c) On the
supply side, are there locational dierences in
the availability to households of o-farm
activities?
2. THE IMPORTANCE OF OFF-FARM
INCOMES FOR LANDED HOUSEHOLDS
We start by analyzing in Table 1 the sources
of income for households classi®ed by farm size
measured in rainfed-equivalent hectares. In the
ejido sector, land endowments are exogenous
since there is no land market. Land is accessed
through the land reform process and through
subsequent inheritances to only one child.
There are three surprises in the data relative to
conventional wisdom.
The ®rst surprise is that, on average, o-farm
income accounts for 55% of total household
income, increasing from 38% on the largest
farms to 77% on the smallest. Hence, in
Mexico, with a relatively well-integrated labor
market, a fair degree of economic decentralization toward secondary towns (Rello, 1996),
and intense migration patterns, o-farm activities are very important for farm households.
The ``viable'' family farms created by the land
reform in fact comprise households that, on
average, are more nonfarmers than farmers. As
expected, total farm income and the share of
income derived from farm activities (agriculture
and livestock) increase with farm size. As
expected as well, the share of total household
income derived from o-farm activities falls
with farm size: with the exception of remittances, which is most important for medium
farms, all categories of o-farm activities are
relatively more important for households with
MEXICO
469
Table 1. Sources of income in the Mexican ejido by farm size, 1997
Farm size in rain-fed equivalent
hectares
All
Ó 2001 Elsevier Science Ltd. All rights reserved
Printed in Great Britain
0305-750X/01/$ - see front matter
www.elsevier.com/locate/worlddev
PII: S0305-750X(00)00113-3
Income Strategies Among Rural Households in
Mexico: The Role of O-farm Activities
ALAIN DE JANVRY and ELISABETH SADOULET
University of California at Berkeley, USA
Summary. Ð O-farm activities generate on average more than half of farm households' incomes in
the Mexican ejido sector. Participation in these activities helps reduce poverty and contributes to
greater equality in the distribution of income. This paper analyzes the determinants of access to ofarm sources of income across households. We ®nd that education plays a major role in accessing
better remunerated nonagricultural employment. Adults of indigenous ethnic origin suer from an
educational lag and have less access to o-farm nonagricultural employment than non-indigenous
adults at identical educational levels. The regional availability of o-farm employment strongly
aects participation. In addition, women are dierentially limited by distance to urban centers in
their ability to gain o-farm employment. Ó 2001 Elsevier Science Ltd. All rights reserved.
Key words Ð Mexico, rural households, income, o-farm employment, education, ethnicity
1. NEW APPROACHES TO RURAL
POVERTY REDUCTION
Worldwide, the rural sector harbors the vast
majority of the poor, likely accounting for
more than 70% of the total (World Bank,
1999). Even in countries as highly urbanized as
Mexico, where 75% of the population is urban,
rural poverty still represents 32% of total
poverty and 46% of extreme poverty (ECLAC,
1999). With many of the immigrants from rural
areas adding to the ranks of the urban poor, the
contribution of rural poverty to total poverty is
far greater than these percentages indicate
(Ravallion, 2000). Reducing rural poverty has
for this reason been a long-standing concern,
motivating an array of initiatives by governments,
nongovernmental
organizations
(NGOs), and international development agencies. The traditional approach has been
through redistributive land reforms and integrated rural development programs to increase
the productivity in agriculture of the assets
controlled by the rural poor. In general, integrated rural development programs, focused on
agriculture as the solution to rural poverty and
on the role of the government in delivering
services to enhance productivity, have met with
limited success and have not been sustainable
once government subsidies were removed
(World Bank, 1997). The approach also
underestimated the great degree of heteroge467
neity in asset positions across households and
the multiplicity of activities in which they are
engaged to generate income. In particular, ofarm activities are typically pursued by a
majority of the rural poor, both because they
lack access to sucient land to make agriculture a viable income strategy, and because
market failures for credit and insurance push
them into o-farm activities to diversify their
risks and seek sources of liquidity to be used in
agriculture.
Failures of the integrated rural development
approach, and deep changes in the context
where rural development is being pursued
(typically including trade liberalization,
descaling of public subsidies, elimination of
parastatal services to agriculture, political
democratization, decentralization of governance, the proliferation of civil society organizations, and ideological shifts toward greater
recognition of the role of markets and the
importance of competitiveness for peasant
households), have led to experimenting with a
widely dierent approach to rural development, characterized by the roles of decentralization, local organizations, participation, and
a demand-driven approach to the allocation of
public resources (de Janvry et al., forthcoming). A distinguishing feature of this new
approach is that it takes a comprehensive view
of the multiplicity of sources of income
households are relying upon in a particular
468
WORLD DEVELOPMENT
regional setting. In so doing, detailed analyses
of sources of income for rural households have
revealed the tremendous importance of ofarm, and among those, nonagricultural sources of employment and income (Reardon et al.,
1998). Promoting the generation of o-farm
income-earning opportunities and seeking to
enhance access for the rural poor to these
sources of income is thus a particularly
important aspect of this new approach to rural
development. Gaining a good understanding of
the determinants of participation in o-farm
activities and of the levels of income achieved
in these activities by dierent categories of farm
households is thus essential for the design of
the new approach to rural development and the
focus of this paper.
We analyze here the income strategies of
households in the Mexican ejido sector. The
ejido sector was created by the sweeping land
reform that followed the Mexican revolution of
1910. Land in that sector was allocated to
peasant communities called ejidos. Today, the
ejido sector contains approximately 60±65% of
the rural population, half of the country's
agricultural land, and also half of the irrigated
area (de Janvry et al., 1997). It is a major
reservoir of rural poverty, and consequently
has been the focus of rural development eorts.
Mexico is at the forefront of the new approach
to rural development, in particular through the
ambitious Pronasol (Cordera & Vanegas, 1999)
and Progresa (Scott, 1999) programs.
In the ejido population, all households are
landed as a result of allocations through the
land reform (Lamartine Yates, 1981). They
have access to a plot of land in usufruct cultivated individually, and to common property
resources from which extraction is generally
individual (grazing, forest products) and
sometimes collective (social forestry). Because
of incomplete property rights, the ejido sector is
severely constrained in accessing commercial
credit. This may induce these households to
seek liquidity for farm inputs and investments
by participating in o-farm activities as a
complement to their farm activities. At the
same time, as a consequence of structural
adjustment policies, public services to the sector
have been curtailed. As a consequence, the
pro®tability of agriculture has been held low,
also inducing participation in o-farm activities, but this time as a substitute for farm
incomes.
The data we use come from a nationwide
survey of the ejido sector conducted in 1997 by
the Mexican Ministry of Land Reform and the
World Bank (World Bank, 1998). The survey is
representative of the ejido sector at both the
national and the state levels. It consists in a set
of 250 ejido-level and 928 ejidatario-level
observations within the selected ejidos.
In this paper, we analyze the importance of
o-farm activities in these households' income
strategies. The questions of interest in analyzing the role of o-farm incomes are the
following: (a) Can o-farm activities substitute
for low access to land in helping households
generate income, and do o-farm incomes help
redress income inequality among ejidatarios?
(b) On the demand side, what are the determinants of individual participation in o-farm
activities and of the household levels of income
derived from each of these activities? (c) On the
supply side, are there locational dierences in
the availability to households of o-farm
activities?
2. THE IMPORTANCE OF OFF-FARM
INCOMES FOR LANDED HOUSEHOLDS
We start by analyzing in Table 1 the sources
of income for households classi®ed by farm size
measured in rainfed-equivalent hectares. In the
ejido sector, land endowments are exogenous
since there is no land market. Land is accessed
through the land reform process and through
subsequent inheritances to only one child.
There are three surprises in the data relative to
conventional wisdom.
The ®rst surprise is that, on average, o-farm
income accounts for 55% of total household
income, increasing from 38% on the largest
farms to 77% on the smallest. Hence, in
Mexico, with a relatively well-integrated labor
market, a fair degree of economic decentralization toward secondary towns (Rello, 1996),
and intense migration patterns, o-farm activities are very important for farm households.
The ``viable'' family farms created by the land
reform in fact comprise households that, on
average, are more nonfarmers than farmers. As
expected, total farm income and the share of
income derived from farm activities (agriculture
and livestock) increase with farm size. As
expected as well, the share of total household
income derived from o-farm activities falls
with farm size: with the exception of remittances, which is most important for medium
farms, all categories of o-farm activities are
relatively more important for households with
MEXICO
469
Table 1. Sources of income in the Mexican ejido by farm size, 1997
Farm size in rain-fed equivalent
hectares
All