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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: prembh@umich.edu.
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:prembh@umich.edumailto:prembh@umich.eduhttp://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:prembh@umich.edu
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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.
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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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8/18/2019 1-s2.0-S0743016713000442-main
10/11
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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