Sarhad J. Agric. Vol.28, No.4, 2012 FACTORS AFFECTING RURAL LIVELIHOOD CHOICES IN NORTHWEST PAKISTAN INAYATULLAH JAN*, MUNIR KHAN KHATTAK**, M. ASIF KHAN***, SHAKEEL HAYAT**** and TARIQ RAHIM* * Institute of Development Studies, Agricultural University, Peshawar – Pakistan ** Department of Agricultural Economics, Agricultural University, Peshawar – Pakistan *** PhD Fellow (former), Georg-August University, Goettingen - Germany **** Institute of Management Sciences, Peshawar - Pakistan ABSTRACT This paper investigates the factors that affect occupational choices of populations living in rural areas. The study was carried out in rural northwest Pakistan in 2005-06. Results from the multinomial logit model reveal that the likelihood to participate in non-farm informal sector increases for household having relatively younger head with no education. Household size is positively and significantly related to all the occupational groups while additional working members in a household reduces the odds to engage in farming by about 67% relative to non- farm informal sector. Similarly, per capita income also plays a significant role in pursuing occupations other than informal activities. The study concludes that in order to uplift rural areas, rural non-farm sector should be given due attention while formulating developmental policies. Keywords: Occupational choice, rural livelihood, Multinomial logit model, non-farm employment Citation: Jan. I., M. K. Khattak, M. A. Khan, S. Hayat, and T. Rahim. 2012. Factors affecting rural livelihood choices in Northwest Pakistan. Sarhad J. Agric. 28(4): 681-688 INTRODUCTION The livelihood structures in rural Pakistan have exhibited tremendous changes in the last few decades. Pakistan has a large rural sector characterized by poverty and deprivation (Jan, 2012). Rural poverty in Pakistan, as is the case in many other developing countries, is multi-faceted which includes economic and social vulnerability, increasing levels of poverty in physical and financial terms, gender inequality, bad governance system, and inadequate human capital. The constantly increasing population and declining capacity of agricultural sector to accommodate additional labor results in a rapidly increasing demand for non-farm employment. Land-owners tend to manage their own land with capital intensive technologies displacing labor-intensive technologies (Jan et al., 2011). Hence, the achievement of the necessary livelihood outcomes of population in rural Pakistan is faded by the institutional barriers along with no or less access to the required physical and human capital. Nevertheless, there are insufficient evidences of rural people engagement in different income generating activities. What strategies do they deploy and why? What are their priorities and what is the pace and direction of their achievements? Besides, it is also required to determine the dynamics that influence an individual’s decision to choose a specific income- generating activity. Structural changes in rural economies are a continuous process and proper understanding of such changes is important for an effective policy formulation and implementation. A general view about rural economy in Pakistan is that it is exclusively based on agriculture and associated industries. However, there is a growing evidence that rural economic sector does not only mean farming but a lot more (Manig, 1991) as it represent people from all occupations, social and economic actions, physical and social infrastructure, and diversified natural resources in rural areas (Csaki and Tuck, 2000). Hence, rural livelihoods partly look at the income derived from economic activities and mainly at a holistic way of rural livelihood strategies. According to Scoones (1998), there are three core rural livelihood strategies, viz., agricultural intensification / extensification (agricultural intensification is labour-led while extensification is capital-led), livelihood diversification, and rural-urban migration. Similarly, the prospects of livelihood increases when rural households tend to adopt a wide-range of activities and assets for their survival and improvement of their living standards (Ellis, 2000). This diversification, however, is subsistence oriented in many cases. Additionally, rural people also apply the strategy of multiple employment or pluri-activity in addition to the farm activities, particularly in situation where income from the farm does not meet the demands of the farmers (Dharmawan, 1994; Upton, 1996). Some of the households diversify their activities due to externalities (lack of cash, credit or geographical conditions) while some are pulled into more remunerated activities. For instance, rural households in Pakistan often depend on off-farm activities for a reasonable proportion of their aggregate income. Nonetheless, Reardon et al., (2000) identified relatively mixed evidence with some areas in India and Pakistan where the richest households experienced smaller share of non-farm income. Off-farm employment can be classified in two major components - wage employment