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    Rural livelihood change? Household capital, community resources and

    livelihood transition

    Prem B. Bhandari*

    Population Studies Center, University of Michigan, 426 Thompson Street, Ann Arbor, MI 48106-1248, USA

    Keywords:

    Capital

    Farm exit

    Livelihood

    Nepal

    South Asia

    a b s t r a c t

    Using the sustainable livelihoods approach, this study examines the extent to which household human,natural and economic capital, socio-cultural background and physical resources contribute to livelihood

    change of farm household to non-farm activities in a rural agrarian setting of Nepal. A number of studies

    examine the inuence of various macro-level, particularly economic factors on farm exit in developed

    countries. However, we know much less about micro-level household and community assets that

    contribute to decisions on livelihood transition by farm households in developing countries. I use the

    unique longitudinal panel data between 1996 and 2001 collected from 1180 farm households from a

    rapidly changing rural agrarian setting of Nepal. The   ndings reveal that the availability of household

    labor, particularly children, access to cultivated land, and livestock ownership hinder decision to liveli-

    hood transition net of other factors known to inuence livelihood change. Moreover, proportion of non-

    farm households in the community signicantly and positively inuenced livelihood transition of farm

    households. These ndings provide important insights on livelihood transition in a rapidly changing poor

    rural agrarian context.

     2013 Elsevier Ltd. All rights reserved.

    1. Introduction

    This study uses the sustainable livelihood approach to examine

    the extent to which the access to various capital inuence a

    household’s livelihood transition from farming to non-farm activ-

    ities also called farm exit in a poor rural agricultural setting of 

    Nepal. A number of studies explain farm exits in developed coun-

    tries such as in the United States, Canada, Israel, Germany, Austria

    and Finland (Bragg and Dalton, 2004; Foltz, 2004; Glauben et al.,

    2006;   Goetz and Debertin, 2001;   Kimhi and Bollman, 1999;

    Pietola et al., 2002; Stiglbauer and Weiss, 2000; Vare and Heshmati,

    2004). Many of these studies focused on socioeconomic forces

    inuencing farm exit such as government payments, off-farm

    employment, land size, types of farm enterprises, land and live-stock ownership, and returns from off-farm employment oppor-

    tunities. Some of them also examined the inuence of demographic

    factors such as farm operators’  age, their marital status, gender,

    family size, and number of children (Glauben et al., 2006;  Kimhi

    and Bollman, 1999;   Pietola et al., 2002;   Stiglbauer and Weiss,

    2000; Vare and Heshmati, 2004). Because a very small proportion

    of the population of these countries is engaged in agriculture, these

    studies are motivated by policies designed to retain farms (Bragg

    and Dalton, 2004; Foltz, 2004; Goetz and Debertin, 2001).

    Studies of farm exit or livelihood transition are almost entirely

    absent in poor rural agrarian contexts of developing countries

    including Nepal. This study contributes to the existing knowledge

    gap by empirically examining the inuence of various livelihood

    assets on livelihood transition of farm households to non-farm

    activities in a poor rural agrarian context of Nepal. This investiga-

    tion is important for several reasons. First, about three-quarters of 

    poor people in developing countries directly or indirectly depend

    on subsistence agriculture for their livelihoods. The   World Bank

    (2008)   recognizes that promotion of agriculture is important in

    agriculture-based countries particularly those in Sub-Saharan Af-

    rica for achieving the Millennium Development Goal (MDG)through reducing poverty and hunger. However, in agricultural

    transforming countries such as those of South and East Asia, the

    Middle East and North Africa, the World Bank suggests assisting

    farmers to help move out of agriculture in addition to other alter-

    natives such as shifting to high value agriculture and promoting

    non-farm activities as important pathways out of poverty.

    Second, shift of farm occupation by individuals and households

    to non-farm activities referred to as farm exit or livelihood transi-

    tion is increasing recently in Nepal. The Nepal Labor Force Survey

    reported a signicant decline in the proportion of population

    currently employed in agriculture from 76 percent in 1998 to 67*   Tel.:  þ1 734 764 6349 (work); fax:  þ1 734 615 3557.

    E-mail address:  [email protected].

    Contents lists available at  SciVerse ScienceDirect

     Journal of Rural Studies

    j o u r n a l h o m e p a g e :   w w w . e l s e v i e r . c o m /l o c a t e / j r u r s t u d

    0743-0167/$ e  see front matter    2013 Elsevier Ltd. All rights reserved.

    http://dx.doi.org/10.1016/j.jrurstud.2013.05.001

     Journal of Rural Studies 32 (2013) 126e136

    mailto:[email protected]:[email protected]://www.sciencedirect.com/science/journal/07430167http://www.elsevier.com/locate/jrurstudhttp://dx.doi.org/10.1016/j.jrurstud.2013.05.001http://dx.doi.org/10.1016/j.jrurstud.2013.05.001http://dx.doi.org/10.1016/j.jrurstud.2013.05.001http://dx.doi.org/10.1016/j.jrurstud.2013.05.001http://dx.doi.org/10.1016/j.jrurstud.2013.05.001http://dx.doi.org/10.1016/j.jrurstud.2013.05.001http://www.elsevier.com/locate/jrurstudhttp://www.sciencedirect.com/science/journal/07430167http://crossmark.crossref.org/dialog/?doi=10.1016/j.jrurstud.2013.05.001&domain=pdfmailto:[email protected]

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    percent in 2008 (Central Bureau of Statistics, 1999, 2009).1 More-

    over, within households, it is often not only one or two individuals

    but all members who change from farming to non-farming occu-

    pations. For example, in the Western Chitwan Valley the setting for

    this study, the 1996 Chitwan Valley Family Study (CVFS) reported

    that about 7.5 percent of households left farming between 1996 and

    2001 (Bhandari, 2006). While this rate of attrition might not seem

    rapid, that it occurred in only   ve years makes it signicant.

    Moreover, much less is known about various factors that contribute

    to livelihood transition by farm households in developing countries

    including Nepal.

    Third, understanding of this issue is also important in the

    Nepalese context because increasing pressure of population in

    agriculture has been considered one of the important problems

    facing the country (Nepal Agriculture Perspective Plan,1995; Ashby

    and Pachico,1987). It is believed that increased population pressure

    on agricultural land has contributed to low agricultural produc-

    tivity due to increased marginal land under cultivation (Chitrakar,

    1990;  Karan and Ishii, 1996). Therefore, lessening the pressure of 

    population in agriculture by diverting farm based individuals to-

    ward non-farm activities such as formal and informal sector jobs,

    tourism, and business has been the policy agenda of the Nepalese

    government (NPC, 1998;  NPC, 2003). In addition, the World Bank(2008) also recognizes that assisting farmers to help move out of 

    agriculture is one of the important pathways out of poverty. By

    analyzing the unique longitudinal panel data of households at two

    points in time, 1996 and 2001, this study affords to fulll the

    existing knowledge gap by empirically examining the inuence of 

    various capital assets on livelihood transition of farm households to

    non-farm activities.

    2. Study setting 

    The Western Chitwan Valley situated in the southern plain of 

    central Nepal is the setting for this study. The Valley is sur-

    rounded by the Rapti River and the Royal Chitwan National Parkon the south, the Narayani River on the west and north, and

    Barandabar forest on the east. The area covers part of the Bhar-

    atpur municipality and 12 Village Development Committees

    surrounded by the Narayani River, the Mahendra   Rajmarg   (the

    national Highway), and the Chitwan National Park. Narayanghat

    is the largest market center in the District, is the main business

    hub.

    The household economy is primarily agriculturally based. Before

    the 1950s, the area was inhabited primarily by Terai Janajati

    (indigenous) groups such as the Tharu, Darai and Kumal. At that

    time, the area was heavily infested with malaria-bearing mosqui-

    toes. In 1956, the government initiated the Rapti Valley Develop-

    ment Project (RVDP) with aid from the United States Agency for

    International Development (USAID) to initiate a rehabilitation

    program in the Valley by eradicating malaria. The government also

    provided land to migrants ranging from 4  bighas (1 bigha ¼ 0.68 ha

    or 1 ha   ¼   1.5  bigha) to 100   bighas   by clearing the dense forest

    (Shrestha, 1990). Currently, the Valley is inhabited mostly by in-

    migrants, especially from the Hill and the high Hill as well as

    other Terai districts including India (Blaikie et al., 2000; Guneratne,

    1998). The Valley now is home to diverse ethnic communities that

    range from Terai Janajati (indigenous) (e.g. Tharu, Kumal, Darai) to

    high caste Hindu (e.g. Brahmin and Chhetri), Hill Janajati

    (indigenous) (e.g. Gurung, Magar and Tamang),   Dalit   (e.g. Kami,

    Sunar, Damai and Sarki) and Newar.

    Transformation in the Valley has resulted in a proliferation of 

    government services, businesses, and wage labor jobs in Nar-

    ayanghat and Chitwan (Shivakoti et al., 1999). Various govern-

    mental and non-governmental organizations such as the District

    Agricultural Development Section, Agricultural Statistics Sub-

    station, Agricultural Inputs Corporation, District Cooperative Sec-

    tion, Cooperative Union, Nepal Food Corporation, Nepal Bank

    Limited and Agriculture Development Bank including the Institute

    of Agriculture and Animal Science provide various services. A few

    large industries such as Bottlers Nepal and many other small scale

    industries have been established in and around the Valley. More

    recently, many poultry production farms have been established

    (Bhandari and Ghimire, 2013;   Shrestha and Bhandari, 2000;

    Shrestha et al., 1998/1999). Transportation and communication

    networks such as roads, radio, television, and telephone facilities

    are relatively well developed compared to other parts of the

    country. These transformations have generated off-farm employ-

    ment opportunities in trade, agribusiness, tourism, and industry

    (Shivakoti and Pokharel, 1989).

    3. The conceptual framework, empirical evidence andhypothesis

    This study uses the sustainable livelihoods approach, a tool

    developed to improve understanding of livelihoods, particularly the

    livelihoods of the poor people. I use this framework e the access to

    “capitals and capabilities”   (e.g.   Bebbington, 1999;   DFID, 1999;

    Scoones, 1999)  e   in understanding a household’s livelihood tran-

    sition from farming to non-farm activities. This sustainable liveli-

    hoods approach is relevant for several reasons. First, this approach

    recognizes the importance of capabilities, assets and activities

    required for a means of living. Second, this approach helps under-

    stand the links between individual or household assets and the

    activities in which households engage with a given set of assets.

    Third, this approach brings together various critical factors thataffect the vulnerability or strength of survival strategies (Allison

    and Ellis, 2001;   Carney, 2002;   Ahmed et al., 2008). Specically, I

    examine the inuence of the access to various livelihoods capital e

    human capital (e.g. labor availability and skill),natural andnancial

    capital (e.g. operational land holding and ownership of land and

    livestock), socio-cultural context (e.g. caste/ethnicity), and physical

    resources (e.g. the access to non-family community resources) on a

    household’s livelihood transition from farming to non-farm activ-

    ities in a poor subsistence agrarian setting of Nepal.

     3.1. Human capital and livelihood transition (farm exit)

    Human capital comprises of amount and quality of labor avail-

    able, skills, knowledge and health that together enable individualsor households to pursue different livelihood strategies to achieve

    their livelihood objectives (DFID, 1999). In subsistence-based poor

    rural agrarian societies, human capital such as the quality and

    quantity of available labor is a building block for acquiring liveli-

    hood objectives and sustaining livelihood outcomes. A household

    uses traditional labor-using inputs, for example, bullocks (and hu-

    man power) for plowing farm land, farmyard manure for fertilizing

    crop  elds, and weeding and taking out diseased or insect infested

    plants as long as family labor is available to carry out these activ-

    ities. Their use depends upon the number of working-age family

    members   e   men, women and children   e   available to the farm

    household. The availability of working-age family members which

    is directly used in household production determines the size of the

    households’  farm labor force (Food and Agriculture Organization

    1 The Nepal Labor Force Survey denes currentlyemployed as e if a person did at

    least one hour’s work in the previous seven days or if the person had a job

    attachment (Central Bureau of Statistics, 1999,   2009). This is in line with the

    standards of the International Labor Organization (ILO).

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    available in urban areas. Therefore, I hypothesize that  households

    close to the urban center are more likely to exit farming (H7). Simi-

    larly, the presence of non-farm households in the community may

    also affect farm exit decision.  Goetz and Debertin (2001)  in their

    study of the U.S. counties found that off-farm employment

    encouraged farm exits in counties where the number of farm

    proprietors declined. This implies that the proportion of non-farm

    households may inuence farm exit decisions. Secondly, non-farm

    households in the community exert pressure for off-farm services,

    which may encourage farm households to engage in newly created

    off-farm jobs. Hence, I argue that households living in communities

    with large proportion of non-farm households are more likely to

    exit farming (H8).

    4. Methods

    4.1. Data sources

    Data for this study come from multiple surveys collected by the

    Chitwan Valley Family Study (CVFS) from the Western Chitwan

    Valley of south central Nepal. Specically, the 1996 household

    census data, household consumption and agriculture survey data

    1996 and repeated in 2001, and the 1996 neighborhood history dataare used in this study (for details,  http://perl.psc.isr.umich.edu/).

    A farming household is the unit of analysis. The information

    comes from the households that were farming during the 1996

    household consumption and agriculture survey. A farming house-

    hold is dened as a   “household in which at least one member (not

    necessarily the head, the reference person or the main income

    earner) is operating a holding” as dened by the FAO (1986, p. 144).

    Specically, the survey considered a household as farming if the

    household reported that it was engaged in the production of any

    kind of crop in at least 10  dhurs  (0.500   kattha  ¼ 0.017 ha) of land

    during the survey period. The survey also asked the actual size of 

    land under various crops during the survey year. The validity of the

    response on farming status was conrmed by examining the actual

    size of land the householdwas cultivating during the surveyperiod,whether it is equal to or more than 10  dhurs. The 2001 household

    consumption and agriculture survey also dened   ‘farming’  in the

    same way as the earlier 1996 survey and the same procedure was

    applied to identify a farm household.

    The 1996 CVFS household census data and the 1996 household

    consumption and agriculture survey data were collected from 1805

    households located in 171 neighborhood clusters. However, due to

    resource limitations, the 2001 household consumption and agri-

    culture survey data were restricted to 1523 households living in 151

    neighborhoods in 1996. Despite the fact, households that were not

    included in the 2001 interview did not differ signicantly from the

    1996 households. The data were collected using a face-to-face

    interview technique that administered a scientically designed

    interviewer assisted structured schedule. Information on the entireasset measures such as human, natural, economic and socio-

    cultural context used in this study come from the 1996 survey.

    The household farming status, the measure of livelihood transition

    or farm exit, was obtained from the 1996 and 2001 surveys.

    Neighborhood or community level information was also

    collected in 1996 to construct measures of community character-

    istics or community physical resources. The neighborhood clusters

    were the lowest level sampling units considered for CVFS. In brief,

    prior to choosing samples of these neighborhoods,the study area of 

    the Western Chitwan Valley was  rst divided into three different

    strata based on the approximate distance from Narayanghat, the

    urban center of Chitwan District, to select a representative sample

    of neighborhoods (see  Barber et al., 1997; for detail). Strata 1

    included the area nearest to Narayanghat while strata 3 included

    the area farthest from it. From each stratum, 10 settlements were

    selected based on 1991 population census. Then, each settlement

    was divided into small neighborhood clusters with   xed

    geographic boundary. Each neighborhood clusters consisted of 5e

    15 households living inside the boundary. Then, a representative

    group of neighborhood clusters were chosen using the systematic

    sampling techniques making a total of 171 neighborhood clusters.

    From each neighborhood, neighborhood histories of community-

    level changes over time such as bus services, schools, health ser-

    vices, markets, dairy, cooperatives and other community services

    were collected. The information was collected from each commu-

    nity using in-depth interviews, key informant surveys, and other

    secondary data sources.

    4.2. Measures

    4.2.1. Measure of livelihood transition or farm exit 

    The 1996 household consumption and agriculture survey

    conrmed the farming or non-farming status of a household by

    asking:   “Does your household do any farming?” Similarly, the 2001

    household consumption and agriculture survey also conrmed the

    farming status of each household that was surveyed in 1996 by

    asking the same question. In both surveys, the validity of theresponse on farming status was conrmed by examining the actual

    size of land the household was cultivating during the survey period,

    whether it is equal to or more than 10 dhurs. A household’s farming

    status recorded in 1996 was compared to the farming status of the

    same household in 2001. If a household was farming in 1996 and

    was not farming in 2001, this change in status was considered as

    livelihood transition from farming to non-farming or farm exit.

    Thus, farm exit is measured as a dichotomous measure coded   “1” if 

    a household reported a shift from farming to non-farming occu-

    pation and   “0” otherwise.

    4.2.2. Measures of capital

    Among human capital are family labor characteristicssuch as the

    availability of working age males and females, elderly, children andeducation. Availability of working age family members is the

    number of working-age males and females 15e64 years of age

    living in the household at the time of the 1996 survey. Similarly, the

    presence of elderly is measured as the number of elderly in-

    dividuals over 64 years of age. I also examined separately the effects

    of the number of children below 6 years of age (non-working age),

    and 6e14 years (working age). Since the household survey does not

    identify a household head, the age (in years) of the oldest male is

    used. If there was no male in the household, the age of the oldest

    female was used. Similarly, education of the oldest male member in

    a household is used as number of years of schooling. If there was no

    male in a household, the education of the oldest female was used.

    The access to and ownership of land, ownership of livestock and

    farm inputs use are considered under   natural and/or economic capital. In the Chitwan Valley, two types of farm lands are available

    e bari and  khet .  Bari  is upland, usually un-irrigated, and generally

    not suitable for rice cultivation.  Khet  is low lying land that can be

    irrigated during the monsoon season and is suitable for planting

    rice. The 1996 household consumption and agriculture survey ob-

    tained information about the ownership of   bari   and   khet   land

    separately by asking   “Does your household own the land, is it

    sharecropped, is it mortgaged, is it on contract to you, are you the

    tenant of the land or are there some other arrangements?” Based on

    the responses, farm households were categorized as (i) full owners,

    (ii) owner plus sharecroppers (part-owners), and (iii) sharecrop-

    pers. Similarly, the access to cultivated land is measured as the total

    of  bari   and   khet   land cultivated by a farm household during the

    survey year in the local unit, bigha and kattha (1ha¼

    1.5 bigha¼

    30

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    that the availability of working-age children and men are the two

    statistically important human capital measures in the decision to

    farm exit.

    There could be several reasons behind this result.   Rosenzweig

    (1977,   p. 124) pointed out two important roles of children:   “as

    durable commodities which yield psychic income and productive

    laborers.”   in agricultural households. In rural Nepal, children

    provide support to their parents in a variety of productive roles (for

    example, farm and off-farm work), as well as enabling labor (for

    example, meal preparation and child care) (Kumar and Hotchkiss,

    1988). They share a major portion of the household work burden

    (National Planning Commission and UNICEF/Nepal, 1996). Forinstance, while boys under 14 perform activities such as farming,

    livestock grazing, and collecting rewood and fodder, after 14 years

    they take on the full responsibility of adult males such as plowing,

    digging and chopping logs. Girls, in addition, perform activities

    such as fetching water, cleaning, washing clothes, and caring for

    younger children.

    Another human capital measure, education, however, did not

    statistically signicantly contribute to farm exit, although the di-

    rection of the effect was as expected (odds ratio  ¼  1.030;  p  > .05,

    Model 1). This result corresponds to the  ndings of  Stiglbauer and

    Weiss (2000) among farmers in Austria and among dairy farmers in

    the US (Bragg and Dalton, 2004). It could be due to less variation in

    the level of education: 44 percent of the household heads were not

    educated. Among those who were educated, about 68 percent of 

    them had less than 10 years of schooling. I also examined the effect

    of mean years of schooling of household members as used by Axinn

    and Ghimire (2011) but the result was not statistically signicant

    (results not shown).

    5.2.2. Natural (and economic) capital and livelihood transition

    (farm exit)

    Among various measures of natural and economic capital

    assessed in this study, only the cultivated size of land and livestock

    ownership statistically signicantly contributed to farm exit. Net of 

    all other factors, a one  kattha (30  kattha  ¼ 1 ha) increase in culti-

    vated land signicantly decreased the odds of farm exit by about 4percent (odds ratio   ¼   0.962;   p   <   .01, Model 1), illustrating the

    importance of the access to cultivated land on livelihood transition

    of these smallholder farmers. Stated differently, a 10 kattha increase

    (one-third of a hectare) in cultivated land holding would decrease

    the odds of exiting farming by 40 percent. When this effect was

    further examined by land ownership categories, this result held

    true among full land owners but not for sharecroppers and part

    owners (results not shown).

    Interestingly, ownership of land did not statistically signicantly

    contribute to farm exit. Adjusting for all other measures of capital,

    full land owners were not statistically different from sharecroppers

    and part-owners in terms of occupation change. Surprisingly, net of 

    other factors, both part-owners and sharecroppers were found to

    be less likely to exit farming compared to full land owners,

     Table 1

    Descriptive statistics: demographic, socioeconomic, and neighborhood characteristics by household farming status (N ¼ 1180).

    Measuresa Farming status

    Left farming by 2001 (n  ¼ 80) Continued farming by 2001 (n ¼ 1100)

    Mean or (%)b SD Minemax Mean or (%) SD Minemax

    Human capital

    Family labor availability by type

    Number of working-age females 1.40*** 0.67 0e

    4 1.76 0.97 0e

    10Number of working-age males 1.35** 0.78 0e4 1.70 1.01 0e8

    Number of elderly persons (>64 years) 0.23 0.53 0e2 0.24 0.52 0e2

    Number of children (

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    although this effect was not statistically signicant. In addition,

    when the analysis was disaggregated by land size categories, the

    land ownership also did not play a signicant role on farm exit

    (results not shown). I further compared sharecroppers alongside

    marginal land owners as a single   ‘class’ with larger land owners. A

    slightly stronger but still statistically not signicant relationship

    was evident. This result suggests that the access to operational land

    size was important in the decision to livelihood transition from

    farming to non-farming activities in this setting.

    Farm households that owned animals such as cattle, buffalo,

    sheep and goat were over 51 percent less likely to exit farming

    compared to those that did not own these livestock (oddsratio¼ 0.487; p < .05, Model 1). Households that used modern farm

    technologies were assumed to enjoy the benets fromtheir use and

    therefore, were notexpected to leave farming as frequently as those

    who do not use these inputs. As expected, the use of bio-chemical

    inputs (such as chemical fertilizers and pesticides) and mechanical

    inputs (such as tractors, pumpsets, and farm implements) nega-

    tively inuenced livelihood transition net of all other factors. But

    both of these effects were not statistically signicant. This could be

    because the farming is still subsistence based and is not fully

    commercialized.

    5.2.3. Socio-cultural context and livelihood transition (farm exit)

    Interestingly but unexpectedly, the socio-cultural background

    of farm household measured by caste/ethnicity was not

    statistically important for livelihood transition. Although small

    differences were observed in the rate of farm exit among caste/

    ethnicity groups at the bi-variate level, these differences were

    not statistically signicant suggesting any evidence of caste/

    ethnicity differential in livelihood transition in this setting. One

    reason could be that Chitwan is considered quite different from

    rest of the country in terms of its egalitarian nature and as a

    popular migrant destination. Although not directly related to

    livelihood transition, other studies in this setting and Nepal

    provided mixed results of differences by caste/ethnicity. For

    example,   Bhandari et al. (2007)   using the 2001 Nepal De-

    mographic Health Survey Data found that Brahmin and Chhetri(high caste Hindu) were not signicantly different from other

    caste/ethnic groups such as Dalit, hill Janajati, Terai Janajati and

    Newar in child immunization. Similarly,   Axinn and Ghimire

    (2011) reported that household-level vegetation consumption  e

    use of common land for grazing or collection of fodder did not

    vary by caste/ethnicity in this setting of Western Chitwan Valley.

    On the other hand, other scholars reported a caste/ethnicity

    differential in human capital endowment such as father’s and

    mother’s work and social capital endowment such as migration

    of parents (e.g. Massey et al., 2009); migration of individuals (e.g.

    Massey et al., 2010) and childbearing (e.g.   Ghimire and Axinn,

    2010;   Ghimire and Hoelter, 2007) to mention a few. Therefore,

    further exploration is necessary to understand why farm exit

    decision was not related to caste/ethnicity in this setting.

     Table 2

    Logistic regression models for predicting farm exit by household demographic, socioeconomic and neighborhood characteristics ( N ¼ 1180).

    Measures Multivariate models

    Model 1 e full model Model 2 e  reduced model

    Human capital

    Family labor availability by type

    Number of working-age females   0.107 (0.898)   e

    Number of working-age males   0.263 (0.769)   0.348 (0.706)*

    Number of children (64 years) 0.105 (1.111)   e

    Age of the household head (years)   0.061 (0.941)   e

    Age of the household head squared 0.001 (1.001)   e

    Education of household head (years) 0.030 (1.030)   e

    Natural and economic capital

    Size of cultivated land (kattha)   0.038 (0.962)**   0.049 (0.953)***

    Land ownership: (Ref ¼ Full owners)

    Sharecroppers   0.148 (0.862)   e

    Owners plus sharecroppers   0.774 (0.461)   e

    Any livestock (yes ¼ 1)   0.720 (0.487)*   0.735 (0.480)*

    Technology use in agriculture

    Bio-chemical technology: used any (¼1)   0.392 (0.676)   e

    Mechanical technology: used any (¼1)   0.334 (0.716)   e

    Socio-cultural context

    Ethnicity: (Ref ¼ high caste Hindu e   Brahmin/Chhetri)

    Dalit   0.035 (0.966)  e

    Hill Janajati 0.141 (1.151)   e

    Newar   1.237 (0.290)   e

    Terai Janajati   0.010 (0.990)   e

    Physical resources (neighborhood context)

    Percent non-farm households 0.043 (1.044)*** 0.040 (1.041)***

    Number of services within a 10-min walk   0.023 (0.977)   e

    Proximity to urban center (Ref ¼ strata 1)

    Strata 2 (between strata 1 and 3) 0.600 (1.823)   e

    Strata 3 (farthest from urban center) 0.194 (1.214)   e

    Intercept 0.581 (1.789)   e

    Model Chi-square 127.598*** 107.927***

    Degrees of freedom 22 5

    2LL 457.450 477.122

    Nagelkerke  R-square (percent) 26.2 22.4

    Percent correctly classied 93.4 93.3

    Wald Chi-square *** ¼  p < .001; ** ¼  p < .01; * ¼  p < .05; 1 ha ¼ 1.5 bigha ¼ 30 kattha.

    Figures in parenthesis are odds ratios.

    P.B. Bhandari / Journal of Rural Studies 32 (2013) 126 e136    133

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    5.2.4. Physical resources and livelihood transition (farm exit)

    The results of the effects of various community resources also

    referred to as physical capital on farm exit indicate that the pro-

    portion of non-farm households in the community signicantly and

    positively contributed to farm exit (odds ratio  ¼  1.044;  p  <  .001;

    Model 1) net of all other factors. A one percent increase in the

    proportion of non-farm households in the community increased

    the odds of livelihood transition from farming to non-farming ac-

    tivities by 4 percent. Interestingly, the effect of the number of non-

    family services available in a community, which was statistically

    signicant and positive without controlling for the effect of pro-

    portion of non-farm households (results not shown), turned out to

    be statistically non-signicant when the latter variable was

    simultaneously included in the analysis. Similarly, rural or urban

    location of a farm household was also not important in farm exit

    decision. This could be because households living in communities

    with relatively greater proportions of non-farm households de-

    mand additional services, which help create off-farm employment

    opportunities, thus encouraging other households to leave farming.

    6. Summary and conclusions

    Farm households in Nepal are changing their livelihood strate-gies by shifting their farming occupation to non-farm activities also

    called farm exit. Using the sustainable livelihood framework, this

    study contributes to our understanding of why some households

    leave farming and why others continue it by examining the access

    to various assets or forms of capital known to inuence livelihood

    transition.

    The  ndings revealed that various dimensions of human, nat-

    ural, and economic capital and community resources inuence

    decisions on livelihood transition in this poor rural agrarian setting

    of Nepal. The availability of working-age family labor pool, partic-

    ularlythe presence of working-age males andmore importantly the

    presence of working-age children are found to be important human

    capital that discouraged livelihood transition from farming to non-

    farm activities. Thisnding is plausible because children are widelyused in carrying out farming and other household activities and

    share a major portion of the household work burden (Filmer and

    Pritchett, 1997;   Kumar and Hotchkiss, 1988;   Loughran and

    Pritchett, 1997; National Planning Commission and UNICEF/Nepal,

    1996). Moreover, children may take over farm responsibilities

    from their parents as successors (Glauben et al., 2006). From a

    policy perspective, this   nding suggests that if farmers are

    encouraged to invest household resources in human capital

    development of children such as schooling, rather than using their

    labor on farm and household activities, the effect of the availability

    of working-age children on farm exit may be altered. However,

    exactly why the presence of working-age children in a household

    hinders farm household’s occupation change to non-farm activities

    in this setting remains unclear. Information on children’s time

    allocation in farming, schooling, and other activities, and household

    income sources, and their distribution in various activities,

    including child development (for example, health and schooling)

    may be necessary to answer this question.

    Access to cultivated land and keeping livestock also reduced the

    likelihood of farm exit. Other way round, farm households with

    small size of operational land holding and with no or fewer live-

    stock were more likely to change their livelihood strategies to non-

    farm occupations. These  ndings have important policy relevance

    in the Nepalese context where an overwhelming majority of 

    households are engaged in farming. Moreover, many farm house-

    holds own and cultivate very small holdings that are marginal or

     just enough to sustain livelihoods of their families. For example, in

    2001, over one-half of farm households in Nepal reported to have

    less than one hectare of land. In addition, the farming system is

    crop-livestock mixed. In this situation, development of off-farm

    employment opportunities suitable for small land holders as well

    as those with no or few animals may encourage these farmers to

    move out of farming. While employment of small farm holders in

    the off-farm sector may result in higher incomes, their movement

    out of farming will help relieve the pressure of population in

    agriculture.

    Interestingly but unexpectedly, the socio-cultural background of 

    farm households was not statistically important in the decision to

    livelihoods transition. The farm households that belonged to hill

     Janajati, Dalit, Newar and Terai Janajati were not statistically

    signicantly different from those that belonged to the high caste

    Hindu. This nding provides an important insight of no differences

    in livelihoods transition based on caste/ethnicity. One of the rea-

    sons could be that Chitwan is considered signicantly different

    from rest of the country in terms of its egalitarian nature, migrant

    population, centrality of geographic location and economic devel-

    opment. Further investigation is necessary to understand the

    mechanism why farm exit decision was not related to caste/

    ethnicity in this setting.

    The evidence indirectly suggests that increased access to phys-

    ical resources such as non-family services may positively inuencefarm exit, the effect of which was mediated by the proportion of 

    non-farm households in the community. Development of com-

    munity resources such as schools, health services, banks, co-

    operatives and bus service may provide off-farm employment

    opportunities to individuals. This likely encourages households to

    leave farming occupation thus increasing the proportion of non-

    farm households in these communities. These non-farming

    households may also demand additional off-farm services in the

    community, which may further encourage other farm households

    to exit due to an increase in off-farm employment opportunities.

    While this is a plausible interpretation of this nding, conrmation

    of this explanation requires data on the employment and occupa-

    tions of those who left farming.

    This study is not free from some methodological limitations.One of the important limitations is the conceptualization of liveli-

    hood change e farm exit. This study denes livelihood transition in

    a very simple way e whether a household that was farming in 1996

    continued or discontinued farming in 2001. In reality, there are

    complications. While households may say they are involved in

    farming at the time of survey, their livelihood strategies may be

    diverse and this study does not explore other livelihood strategies

    such as part-off-farm employment (such as business or jobs or

    wage labor) or migration of one or more members of the household

    adopted by a farm household. Households may continue farming,

    but farming may have played a very limited role in their overall

    livelihood because sons or daughters may have professional income

    or income from migration or from other off-farm sources. Some

    farmers may farm land during the monsoon but leave fallow duringdry season when agriculture is more risky. Moreover, this research

    also does not provide information on alternative livelihood stra-

    tegies adopted by households that exited farming. Investigation is

    also needed in order to create necessary services and facilities in

    that direction. Further, it is also not clear whether the livelihood

    outcomes of the households that changed from farming to non-

    farming occupations are better or worse in off-farm sectors or

    whether these households return to farm sector jobs.

    In conclusion, this study provides evidence that households’

    livelihoods assets inuence their livelihoods transition. These

    ndings reveal that the presence of working-age children

    encourage continuation of farming as a livelihood strategy. Thus,

    from a policy perspective, encouraging farm households to invest in

    the human capital development of children may increase farm exits

    P.B. Bhandari / Journal of Rural Studies 32 (2013) 126 e136 134

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    in the long term. This study also provides evidence that the access

    to natural and/or economic capital such as the size of cultivated

    land and livestock keeping are two important factors that inhibit

    livelihood transition from farming to non-farm activities. If Nepal

    continues to pursue policies that encourage small farm holders to

    leave farming, then appropriate economic policies must focus in

    generating alternative employment opportunities in the non-farm

    sector. Such policies should only be pursued if non-farm employ-

    ment increases in suf cient numbers to absorb those who exit

    farming. In the absence of employment growth in the non-farm

    sector, such policies will likely be self-defeating and tend to un-

    dermine the agricultural sector, while further exacerbating urban

    unemployment and congestion.

     Acknowledgment

    This research was supported by a number of grants from the

    National Institute of Child Health and Human Development

    (NICHD) (Grant #R01-HD032912, Grant #R01-HD033551, and

    Grant #R01HD033551-13). I thank William G. Axinn (PI) for

    providing access to the data. Sincere thanks are due to Shannon C.

    Stokes and Leif Jensen, my mentors at the Pennsylvania State Uni-versity for their guidance and valuable suggestions in my disser-

    tation research. I thank Dirgha J. Ghimire for his continuous

    encouragement. I would also like to thank the staff of the Institute

    for Social and Environmental Research-Nepal for their contribu-

    tions to the research reported here. I offer many thanks to three

    anonymous reviewers who provided excellent feedback to improve

    the quality of this manuscript. Last but not least, I owe a special

    debt of gratitude to the respondents who continuously welcome to

    their homes and share their invaluable experiences, opinions,

    thoughts and have devoted countless hours responding to our

    survey questionnaires. All errors and omissions remain the re-

    sponsibility of the author.

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