An economic analysis of farm household pluriactivity in Sri Lanka
Experience in Sri Lanka has shown that agricultural development alone is not capable of significantly improving farm family welfare. Studies conducted elsewhere have shown that when farm households members were pluriactive, they were generally able to enhance their well-being. The objectives of this study are to examine the factors that determine the decisions of farm operators and their wives to be pluriactive in Sri Lanka and assess the effects of farm household pluriactivity on technical efficiency of farming. Off-farm labour supply decisions of farm operators and their wives were explained theoretically, using household production theory. Data collected from 240 farm households, randomly selected from four villagers, were used to test the models. First, determinants of pluriactivity of farm operators and their wives were estimated separately for farm operators and their wives, using both a logit model and a probit model. Second, a bivariate probit model was used to estimate the determinants of pluriactivity of farm operators and their wives together, considering simultaneity of their decisions. Individual, farm and household characteristics influenced mainly farm operators decisions to be pluriactive, whereas individual, household and locational characteristics were more important for wives' decisions. Income from pluriactivity was a major contributor to the well-being of most farm households. However, pluriactive income appears to increase income inequality among farm households. The impact of pluriactivity on technical efficiency of farming was examined by estimating the farm-level technical efficiency of rice production, using the frontier production function technique and then using ANOVA. A positive association was observed between the technical efficiency of rice production and pluriactivity of farm households. Pluriactivity can be seen as a major contributor to household well-being and future strategies to alleviate poverty in rural areas must recognise the potential gains arising from increasing pluriactivity.