derive higher parts of income from migration/transfers (24% vs. 19%), wages (12% vs. 7%), and nonfarm self-employment (11% vs. 9%) land rental facilitates diversification of the occupational structure.

# **2.3 Impacts of rental market participation**

Although the above is suggestive, robust inferences on occupational shifts and welfare or productivity effects of land rental markets require analysis of changes for the same household or plot over time. Its shortcomings notwithstanding, our supplemental survey of rental participants and their partners can provide such evidence. We focus on changes in main occupation to gains in income and productivity and evidence on whether or not land markets realize their full potential.<sup>8</sup> Changes in main income sources by households renting out land (table 2) point to land rental as basis for income diversification. Before renting out land, the vast majority (57%) of these households relied on agriculture, followed by local non-farm employment (23%) and migration (20%). The ability to engage in land rental completely changed this; after renting out land, the share of households deriving their main income from migration had increased by 35 points to 55%, followed by 29% in local offfarm employment, and only 17% who remain in agricultural production, i.e., a total of 40 points less than before land rental. Inspection of the transition matrix highlights that virtually all of the change was due to households shifting out of full-time agriculture to migration (33 points) and local non-farm employment (8 points), complemented by some shift from non-farm employment to migration (3%).

Levels of net per capita income in broad categories before and after land rental for those renting out and in, respectively, provide a better understanding of welfare effects from land rental. The top panel of table 3 shows that rental participation allowed many landlords to increase their incomes: 45% moved up by at least one category, 54% remained in the same category, and less than 1% moved down. While the need to rely on ranges rather than exact figures makes it impossible to compute the impact on average income; the share of landlord households with a per capita income of less than 1,500 Y dropped by 20 points, from 30% to 10%, consistent with evidence that those with low asset endowments engage in migration (Deininger and Jin 2006). The share of households with incomes above 3,000 Y increased from 26% to 47% of the total. The transition matrix for tenants’ income (bottom panel of table 3) before and after land rental also signals improvement; although some two thirds remained in the same income bracket, about one third moved up and only about 1% moved down. With the majority of impacts concentrated at the bottom of the distribution, the distributional impact was unambiguously positive: the share of households in the poorest group (< 1,500 Y) declined from 21% to 10%, a 5 point decrease is observed in the share of households in the 1,5003,000 Y bracket, and the share of those obtaining more than 3,000 Y increased from 27% to 42%.

> 8 Note that the evidence provided is cumulative. While it is very easy to give the sector of employment, estimates of income categories or productivity are likely to be more noisy.

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