What Makes Farmers Exit Farming: A Case Study of Sindh Province, Pakistan

Abstract

In agriculture based economies like Pakistan, farmers often shift from farming to off-farm activities as part of an apparent livelihood transition strategy, despite the fact that most of the workforce depends upon farming. In this paper, we try to uncover insights into how livelihood assets, such as human capital, natural capital, economic capital, and locational characteristics, affect a household’s exit decision from on-farm to off-farm activities as a livelihood transition strategy in rural Pakistan. We analyzed data from 335 farming households from the second largest agricultural producing province in the country, Sindh. Our findings show that more than 19% of households have completely shifted from farming to off-farm activities. Furthermore, we identified that the ‘crop input credit’ is one of the major constraints to farmers converting their previous input-driven small loans into larger loans, where large markups may be imposed if they fail to pay when the harvest is made. The empirical findings from Binary Logistic Regression provide strong evidence for family labor characteristics, particularly for working-age males, working-age females, and working-age children. Surprisingly, the cultivated land size significantly and positively influences farm exit rather than a continuation of farming. Off-farm employment, exogenous shocks, and urbanization also significantly and positively influenced the decision to transition into off-farm work. In contrast, the age of the household head, livestock ownership, and distance to a commercial zone significantly inhibited the decision to exit farming. However, government assistance, including subsidies, strongly encouraged farmers to continue farming. These findings provide new insights into the factors affecting the drivers of both exit and continuation in the farming sector as part of a long-term livelihood transition strategy.