Determinants Of Off-Farm Household Income: Evidence From Rice Farmers In Indonesia
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Abstract
Most small-scale rice farming households in Indonesia face land ownership constraints that result in low on-farm income levels, often falling below the national poverty line. In such circumstances, off-farm income serves as a vital alternative source to meet household needs. This study aims to identify the key determinants of off-farm income among rice farming households in Indonesia using the two-step Heckman selection model to address potential sample selection bias. The analysis is based on household survey data collected in 2016 by the Ministry of Agriculture of the Republic of Indonesia, comprising 321 farming households across 14 major rice-producing districts. The estimation results indicate that off-farm income is significantly influenced by macro-level factors, such as the proportion of non-agricultural labor in the district and geographical proximity to economic centers. At the micro level, the number of working household members and the educational attainment of the household head are positively associated with off-farm income. Conversely, limited access to land and low levels of non-labor income serve as push factors driving participation in low-productivity off-farm activities. The findings suggest that policy interventions should focus on promoting the development of non-agricultural industries in rural areas and improving farmers' access to education and vocational training in order to enhance income diversification and strengthen the economic resilience of farming households.
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