Nonfarm Income, Inequality, and Poverty in Rural Egypt and Jordan

The rural economy of developing
countries has long been regarded as synonymous with
agriculture but in recent years this view has begun to
change. Such diverse activities as government, commerce, and
services are now seen as providing most income in rural
households. Applying decomposition analysis to two new
nationally representative sets of household data from Egypt
and Jordan, the author examines how different sources of
income--including nonfarm income--affect inequality in rural
income. He concludes: 1) Nonfarm income has different
impacts on poverty and inequality in the two countries. In
Egypt the poor (those in the lowest quintile) receive almost
60 percent of their per capita income from nonfarm income.
In Jordan the poor receive less than 20 percent of their
income from nonfarm income. So nonfarm income decreases
inequality in Egypt and increases it in Jordan. 2) Access to
land accounts for this difference between the two countries.
In Egypt the cultivated land base is totally irrigated and
very highly productive. Egypt's large rural population
seeks access to land but because the land-to-people ratio is
so unfavorable, only a minority of rural inhabitants
actually own land. The rest--especially the poor--are forced
to seek work in the nonfarm sector. By contrast, only 30
percent of Jordan's cultivated land base is irrigated
and crop yields are low. So Jordan's rural population
does not press for access to land because the attractive
economic rates of return are found in the non-farm sector.
Unlike Egypt's rich, rural Jordan's rich earn less
than 10 percent of their total per capita income from
agriculture and more than 55 percent of it from non-farm
sources. 3) The poor in both countries depend heavily on
government employment to decrease inequality. Government
wages provide 43 percent of non-farm income for Egypt's
rural poor and 60 percent of Jordan's. But since both
governments already employ far more workers than they can
possibly use, advocating increased government employment to
reduce inequality would not be wise policy advice. From a
policy standpoint, it would be better to reduce income
inequality by focusing on non-farm unskilled labor (for
example, in construction, brick-making, and ditch-digging),
an important income source. 4) In Egypt non-farm income
decreases inequality because inadequate access to land
"pushes" poorer households out of agriculture and
into the non-farm sector. Although agricultural income is
positively associated with land ownership in rural Egypt,
that ownership is unevenly distributed in favor of the rich,
so nonfarm income is not linked to land ownership and is
thus more important to the rural poor.