NON-FARM INCOME AND ITS CONTRIBUTION TO THE TIME TAKEN TO ESCAPE FROM THE CLUTCHES OF POVERTY

The objective of this article is to analyse the impact of non-farm income on poverty and the time taken to escape from the clutches of poverty. The data used in this study is primary data which is gathered through a survey carried out on 384 agricultural households in Kedah Darul Aman, Malaysia. A face to face interview was carried out with selected respondents between the months of April and December 2008. In order to analyse the impact of non-farm income on poverty, this study used a FGT index as proposed by Foster, Greer and Thorbecke while in the case of measuring the impact of non-farm income to the time taken to escape from the clutches of poverty, we used an index proposed by Morduch. The advantage of using these two indexes is that it will enable us to examine the impact of non-farm income to poverty reduction and the impact of different income growth on the time taken to escape from poverty for both groups with and without non-farm income. As such, the question of whether a non-farm income can shorten the duration of poverty or not will be answered. The results show that non-farm income reduces the poverty rate by 42.94%, the poverty gap by 51.47% and the severity of poverty by 55.72%. The results for the time taken to escape from the clutches of poverty shows that for farmers who have income from non-farm sources, the average time taken is shorter than those who do not have a non-farm income. For instance, assuming a growth rate of 6.5% in household income, it will take an average 8.57 years for farmers with a non-farm income to escape from poverty. However, with the same rate of growth in income, farmers without non-farm income will take an average 10.74 years to escape from poverty. These results indicate that having a non-farm income reduces the duration of poverty by 2.17 years. Our study also found that in the case of the hard core poor, the average time taken by them to escape from poverty is shortened by 1.44 years when they participate in non-farm activities.