Date: Tuesday, 28 May, 2024
Time: 4 p.m. onwards
Venue: HSS Department Conference Hall
Title: Does non-farm income always result in intensification of polluting agricultural inputs? New evidence from India
Authors: Sabuj Kumar Mandal, Anviksha Drall
Abstract:
Farm sector in an economy plays vital roles in providing employment to a sizeable population and ensuring food security, especially in developing countries with India being no exception. However, those engaged in farming activities often grapple with issues like unpredictable farm-income due to climatic & price fluctuations, soil infertility, and unavailability of funds to purchase latest farm inputs. To combat with these challenges, farmers often engage in nonfarm activities and invest non-farm income in farm sector. In this regard, the impact of nonfarm income on farm productivity and efficiency is well documented in the literature. However, the impact of non-farm income on intensification of inputs, in general and on environmentally impactful inputs in particular, is less known. Non-farm income may motivate farmers to use productivity enhancing inputs like chemical fertilizers, pesticides etc. Many of these inputs are environmentally harmful. Since, the farm sector alone contributes about 10-14% to global anthropogenic greenhouse gases (GHG) emissions, the current study attempts to find out whether non-farm income leads to intensification of brown inputs (chemical fertilizers, weedicide and pesticides) or motivates farmers to be environmentally accountable for using green (organic) inputs. This is in line with Gasson’s hypothesis that due to preference for clean environment, farmers might be motivated to use environmentally friendly farm inputs. In this regard, the study develops a theoretical framework based on the agricultural household model (AHM). We model the impact of non-farm income on input intensification, accounting for the vital role of farmers’ preferences towards clean environment. We show that non-farm income may (i) reduce input intensity due to farmers’ preferences for clean environment, and (ii) increase input intensity owing to the positive investment effect of non-farm income. Nevertheless, to find out which of the two effects is prominent, we rely on empirical estimation undertaken in second part of the paper. For estimation, the study utilizes Vella-Verbeek Model based on the control function approach which corrects for endogeneity of non-farm income through interdependence between error terms. This contrasts with the instrumental variable approach which requires validity of instruments. The estimation is based on VDSA’s (Village dynamics of South Asia) panel data of five years (2010-2104) for semi-arid tropics and eastern regions in India. The empirical results show that non-farm income increases has the usage of both brown and green inputs, but share of green inputs is found to be higher for those earning more non-farm income. This reflects that even though input intensity rises with non-farm income, farmers do prefer a cleaner environment as reflected by rising share of green inputs in the input bundle. Our results are robust to omitted variable bias. In light of our empirical results, developing countries should formulate appropriate policies to develop their non-farm sectors. Non-farm income will not only provide the farm households an opportunity to diversify but also motivate them for sustainable agricultural practices.
Speaker:
Dr Sabuj Kumar Mandal is currently working as an Associate Professor of economics in the Department of Humanities and Social Sciences, Indian Institute of Technology Madras (IITM), Chennai. He completed his B.Sc (Economics) from the Scottish Church College Kolkata and M.Sc (Economics) from the University of Calcutta with a specialization in Econometrics and Environmental and Resource Economics. He completed his doctoral degree in economics from the Institute for Social and Economic Change, Bangalore. His teaching and research interests include Applied Econometrics, Energy and Environmental Economics (efficiency analysis), Oil price shock and stock market behaviour, Climate Change and Migration, Corporate Social Responsibility and Firm Performance and Behavioral & Experimental Economics. He has several national and international publications in his credit including Energy Policy, World Development, Applied Economics, Energy Efficiency etc. He was awarded Young Economist Award 2015 by the Indian Econometric Society for his contribution to quantitative economics. Recently, was awarded Fulbright Nehru Academic and Professional Excellence Award 2020-21 (research category) and was affiliated with Arizona State University for collaborative research.