Rural nonfarm employment and income diversification in Colombia

Ð Using data for rural households from Colombia we ®nd that o€-farm employment contributes a signi®cant share (45% on average) to household income but that the importance of o€-farm income and returns to household labor vary over the income distribution. Analysis reveals signi®cant gains from specialization butÐfor households able to specializeÐno systematic di€erences in returns to labor between farm and nonfarm sources. We conclude that, in Colombia, there is no con¯ict between development of the farm and the nonfarm sector but that, to maximize gains from nonfarm development and reduce the scope for undesirable distributional consequences, policies enabling households to specialize might be called for. Ó