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.