Can Off-farm Participation Improve Agricultural Production and Farmer Welfare in Tanzania and Uganda?
The findings suggest that, rather than being a complement to agricultural production, off-farm participation acts as a substitute. Although it competes with and diminishes agricultural production, it can improve household welfare. Over time, the change in labor supply composition has pushed highly productive farmers into off-farm participation, contributing to a reduction in agricultural production. The finding that off-farm participation has a positive impact on household welfare in Tanzania supports the argument that offfarm income has the potential for increasing wealth and income for farm households by complementing farm income. It also suggests that income from off-farm employment is channelled to consumption. Policymakers should therefore recognize that a synergy between pro-agriculture and pro-welfare policies is critical for ensuring desirable outcomes from off-farm participation. Policies that aim to encourage off-farm participation while reinforcing agricultural production and household welfare are vital. For instance, policies fostering processing and commercialization of agricultural produce may offset the adverse effects of off-farm participation on agricultural productivity.