How access to non‐farm income affects farm investment in rural India?

This study examines the impact of non‐farm income on farm investment using a nationally representative dataset of 35,200 farm households in rural India. We find a heterogeneous effect of non‐farm participation on farm investment. Unconditional Quantile Regression (UQR) method has been applied to check whether farm investment differs between households with and without access to non‐farm incomes at diverse levels of farm investment quantiles. We found that non‐farm income has a positive and statistically significant impact on farm investment throughout all quantiles except the lowest quantile (0.25th quantile). Besides, we also found consistently rational results for our control variables. The results highlight the important role of non‐farm income in improving farm investment. Therefore, improvement in rural households' access to non‐farm employment opportunities could offer an effective mechanism to expedite productivity‐ augmenting investment to the farm.