individuals with higher education (secondary and further education) do not seem to use their skills to engage in self-employment. Rather, they tend to enter the public sector.<sup>5</sup> Consistent with the notion that wealthier households tend to benefit the most from nonfarm wage employment and self-employment (Reardon, 1997), Table 2 highlights that in Rwanda individuals from wealthier households have greater access to non-farm occupations and receive higher earnings. Moreover, self-employed individuals earn twice as much as people employed in other non-farm activities and in general, at each level of education, non-farm self-employment brings higher money wages.

Richer households are also more likely to have non-farm earnings as their main source of income while for poorer households, agriculture remains the main source of earnings. Additionally, households from the top quintile<sup>6</sup> depend more on non-farm wage employment than on income from non-farm enterprises (see Table A 1 in Annex 1).

**Table 2: Proportion of adult rural population (%)** **<u>and average hourly wages (Rwf) by status and household quintile</u>**

||**1st quintile**|**2nd quintile**|**3rd quintile**|**4thquintile**|**5thquintile**|_No. of Obs._|
|---|---|---|---|---|---|---|
|Proportion of adult ruralpopulation(%)|||||||
|No occupation|4.4|3.7|3.7|3.0|2.6||
|Agricultural sector|82.5|82.1|78.6|73.0|64.5||
|Non-farm enterprise|4.2|4.1|6.1|7.6|10.4||
|Non-farm wage worker|2.7|2.5|5.3|5.5|11.6||
|At school|6.0|7.5|6.2|10.8|10.9||
|_Number of observations_|_2713_|_2750_|_2874_|_2880_|_2026_||
|Mean Wage for non-farm wage workers(Rwf)|||||||
|Primaryoccupation|72.9|76.6|79.6|105.2|171.3|_1523_|
|Secondary occupation|110.0|43.7|77.2|102.6|278.6|_296_|
|Mean Wage for non-farm self-employed<br>(Rwf)|||||||
|Primaryoccupation|40.8|71.0|107.4|140.7|422.7|_632_|
|Secondaryoccupation|80.8|119.1|166.7|142.3|341.8|_412_|

In rural areas richer households are also more likely than poorer ones to diversify into non-farm enterprise activities (Table 3). This is consistent with previous findings that households from the upper income strata have higher shares of non-farm income in total income and higher absolute non-farm earnings (Reardon, 1997). Moreover, households that have a non-farm enterprise in addition to their farm own on average higher land areas — 1.08 ha — than those who have only a farm — 0.72 ha.

> 5 The main occupation for non-farm wage workers with secondary education is as primary school teacher (61.5 percent of rural adults with secondary or further education who hold a non-farm occupation for their main activity are primary school teachers). The small proportion of individuals with further education who hold an occupation are primary and secondary school teachers, or high level civil servants.

> 6 Quintiles are based on data regarding consumption. These variables were derived by the Ministry of Finance in their poverty profile (2002). The description is in Annex 2 of the poverty profile. In short, “The lowest quintile contains the poorest 20 percent of people in Rwanda, ranked according to the consumption standard of living measure of their households, the second quintile the next poorest 20 percent and so on until the top quintile which contains the richest 20 percent.” (page XI, Ministry of Finance, 2002).

5