The Effects of Non-Farm Enterprises on Farm Households’ Income and Consumption Expenditure in Rural India

Nationally representative data of farm households from India Human Development Surveys (IHDS) conducted in 2004-05 and 2011-12 are explored. This article analyzes the effects of income diversification in non-farm enterprises on farm households’ income and consumption expenditure in rural India. Panel probit models were built to examine the determinants of income diversification while propensity score matching was used to account selection bias resulting from unobserved factors and controls for structural differences between diversified and undiversified farm households. The results suggest that by engaging in non-farm enterprises, rural farm households make positive gains in farm income and consumption expenditure.