Driving Agricultural Transformation: Unveiling the Impact of Rural Livelihood Diversification Strategies in Bangladesh

The diversification from pure agriculture to a combination of farming and non-farm activities raises questions about its impact on Bangladesh's agricultural sector. Diversified sources of non-farm activities may not even influence agriculture to the same extent. This study intends to assess the impact of rural households’ non-farm income-generating activities on farm production and farm input use. A field survey of 153 households that were selected from four villages in Bangladesh was used in this study. Applying the instrumental variables Two Stage Least Square (2SLS), Ordinary Least Squares (OLS), and Seemingly Unrelated Regression (SUR) models, this study finds a positive impact of non-farm income-based livelihood strategies on farm production and farming expenditures on inputs (machinery, chemicals, and hired labor) in general. Participation in wage-based and self-employment activities boosts farm households' investment in modern technology, leading to higher farm production. Conversely, remittance negatively affects agricultural input use and production, possibly due to insufficient amount of remittance or reluctance to engage in farming. From a policy perspective, the findings suggest establishing rural agro-based industries and improving infrastructure to promote wage and self-employment activities in rural areas.