Rural nonfarm employment and income diversification in Colombia

Using data For rural households from Colombia we find that off-farm employment contributes a significant share (45% on average) to household income but that the importance of off-farm income and returns to household labor vary over the income distribution. Analysis reveals significant gains from specialization but-for households able to specialize-no systematic differences in returns to labor between farm and nonfarm sources. We conclude that, in Colombia, there is no conflict between development of the farm and the nonfarm sector but that, to maximize gains from nonfarm development and reduce the scope for undesirable distributional consequences, policies enabling households to specialize might be called for. (C) 2001 Elsevier Science Ltd. All rights reserved.