Consistently with the existing literature, the data from Malawi suggest a divide in participation in the non-farm economy along poverty line. Our descriptive statistics by poverty status indicate that, while participation in self-employment increased for both the poor and the non-poor between the two years, participation rates for the poor are significantly lower than for the non-poor households in both years. In 2013, about 20% of the poor were engaged in selfemployment activities, up from 15% in 2010. Meanwhile the same statistic for the non-poor increased from 20% in 2010 to 30% in 2013. The difference between poor and non-poor is even sharper for wage employment, where the participation rates for the non-poor are more than double the participation rates among the poor in both survey years. The lower gap observed for non-farm self-employment compared to wage employment likely reflects differences in entry barriers between the two types of employment. Non-farm wage employment jobs require more education and better social networks. While the lower participation rates among the poor call for further attention to participation barriers, the fact that participation rates among the poor are still almost 20% justifies the need to understand if and how such households benefit from non-farm activities.

In a more detailed analysis, participation rates and returns by sectors of non-farm selfemployment (Table 4) and non-farm wage employment (Table 5) for the poor and non-poor confirms further patterns of dualism. Our descriptive analyses indicate the existence of high and low return sectors of non-farm activities and the high return sectors are almost exclusively available to a handful of privileged, due to entry barriers that prevent the more marginalized groups (the poor and sometimes women) from accessing those opportunities. In the following paragraphs, we describe the main features and types of non-farm employment in which rural households in Malawi are involved, by poverty status.

# **_Non-farm self-employment in rural Malawi_**

Table 3 summarizes the main traits of non-farm businesses observed in rural Malawi. As most rural non-farm enterprises in SSA, described by Nagler and Naude (2014), the characteristics of rural non-farm enterprises in Malawi are consistent with little potential for job creation as they are mostly informal, have low productivity, and short life spans. Almost half of all the non-farm businesses in rural Malawi are reportedly operated from home, with only 13 percent having access to electricity, and 6 to 8 percent with some formal registration. Business owners are relatively young (38 to 39 years old) and mostly uneducated (75% of business owners have no formal education). Businesses owned by poor household members are less likely to be registered formally compared to those owned by non-poor household members. Also poor business owners appear less educated on average compared to non-poor business owners. These differences might well affect productivity and returns to participation for the poor.

As for the types of household enterprises operated, participants in non-farm selfemployment are involved in a variety of sectors or industries.<sup>16</sup> The distribution of non-farm self16 The classification of non-farm enterprise activities into industry categories used here closely follows the 1992 United Nations International Standard Industrial Classification (ISIC) standards into 5 main groups. The groups include: (a) Primary sector, which comprises agriculture, livestock, hunting, fishing, and mining; (b) Food, Beverage, and Tobacco Manufacturing; (c) Non-food Manufacturing, (d) Commerce and Tourism (wholesale and retail, and restaurants and 14