Invited ArticleDoes non-farm sector employment reduce rural poverty and vulnerability? Evidence from Vietnam and India

- Rural non-farm employment reduces significantly poverty in Vietnam and India.
- Households with access to non-farm employment are less vulnerable.
- Skilled employment has larger effects of reducing poverty and vulnerability.
- Unskilled or manual employment matters for poverty reduction in India.
- The pattern of the results is very similar for Vietnam and India.

The present study examines whether rural non-farm employment has any poverty and/or vulnerability-reducing effect in Vietnam and India. To take account of sample selection bias associated with it, we have applied treatment-effects model. It is found that log per capita consumption or log mean per capita expenditure significantly increased as a result of access to the rural non-farm employment in both Vietnam and India - which is consistent with its poverty reducing role of accessing - with the aggregate effect larger in Vietnam than in India. Access to the rural non-farm employment significantly reduces vulnerability too in both countries, implying that diversification of household activities into non-farm sector would reduce such risks. When we disaggregate non-farm sector employment by its type, we find that poverty and vulnerability reducing effects are much larger for sales, professionals, and clerks than for unskilled or manual employment in both countries. However, because even unskilled or manual non-farm employment significantly reduces poverty and vulnerability in India and poverty in some years in Vietnam, this has considerable policy significance as the rural poor do not have easy access to skilled non-farm employment.