When rural enterprises can readily obtain materials and market their products outside of local areas, labor costs become the dominant factor in their location. The expansion of transport and communication facilities linking the rural sector with the cities may also have a negative impact on the rural nonfarm sector. As rural areas become more accessible, competition from cheaper urban or imported products and changes in rural consumption patterns may also result. On balance, however, the net effect of improved infrastructure is beneficial because it stimulates the growth of an efficient and competitive rural sector. Education primary and secondary promotes the growth of the rural nonfarm sector.
Secondary education stimulates entrepreneurial capacity.
In developing countries, an entrepreneur with an elementary education can expect to earn an income 41 percent higher than one with no education at all. If local government institutions have decisionmaking powers and adequate financial resources, they can help promote the growth and vitality of the rural nonfarm sector. In some East Asian countries, local governments have supplied seed capital and managerial expertise, thus shouldering the initial risks of new ventures. Once established, these ventures become small, private enterprises. Economywide policies such as trade, exchange rate, and general regulatory policies and sector-specific policies such as credit or technical assistance can stimulate the nonfarm sector.