Rural nonfarm employment in developing countries in an era of globalization Thomas Reardon ∗ , Kostas Stamoulis ∗∗ , and Prabhu Pingali ∗∗∗ Abstract Rural nonfarm employment (RNFE) has become a topic of major importance in rural development, as by the mid 2000s, RNFE constituted 35% of rural incomes in Africa and 50% in both Asia and Latin America. The traditional view of RNFE was a sleepy hinterland activity cut off from changes in the national, let alone the global economy. That view was assailed by sweeping changes in rural areas starting with the Green Revolution, then rur-urbanization, and lately, by globalization intervening via both trade and modernization of the national economy including the rise of modern retail and processing. In this article, we hypothesize and offer emerging evidence that the strongest and most positive effects on RNFE of globalization come in the zones that are rur-urbanized, with a tradeables growth-motor induced RNFE sector with clusters of small/medium enterprises for manufactures, and a preponderance of services. Surprisingly, the trade effects are least and the domestic market transformation effects are the strongest. The most challenges are posed for zones that are rur-urbanized and dense zone RNFE with low-moderate local growth motors. The least effects are on hinterland zones. The policy implications are to promote tradeables growth motors (key to creating RNFE in services, the major component of RNFE), and to incorporate “competitiveness”—in a changing urban and global economy—into RNFE promotion. JEL classification: O17, O33, O54, Q12, Q13 Keywords: globalization; rural nonfarm employment; rural towns; supermarkets 1. Introduction Rural nonfarm employment (RNFE) is important to rural households in developing countries. 1 By the mid 2000s, RNFE averaged roughly 35% of rural house- hold incomes in Africa, and 50% in Asia and Latin America (Haggblade et al., 2007). Research shows that household income from RNFE generally dwarfs rural ∗ Agricultural Economics, Michigan State University, East Lans- ing, Michigan, MI 48824-1039, USA. ∗∗ Agricultural Sectorin Economic Development Service (ESAE), Agricultural and Development Economics Division (ESA), FAO Rome Viale delle Terme di Caracalla, 00100 Rome, Italy. ∗∗∗ FAO, Rome, Viale delle Terme di Caracalla, 00100 Rome, Italy. 1 It includes employment in rural areas in manufactures such as food processing or clothing manufacture, and services, such as vehi- cle repair and commerce, whether as an employee or self-employed, whether of products production-linked or not to the primary sector, in any scale, and in any location, whether in the home or outside. households’ migration income, farm wage income, and credit and gifts received. RNFE has grown fast over only the past few decades. Data from the 1970s show that RNFE shares rarely exceeded 20% of rural incomes (Reardon et al., 2007). The spate of research in the 1980s and 1990s that revealed RNFE’s importance contradicted the earlier “conventional wisdom” that farmers only do farming, and spurred various governments, donors, and NGOs to create RNFE promotion programs. Many of the pro- grams were, however, based on an image of RNFE that we call “the historical RNFE,” which concerns semi-subsistance rural-hinterland villages producing Z-goods, as termed by Hymer and Resnick (1969), and not reliant on local “growth motor.” Further, these programs were undertaken in a “closed economy” for- mat without much exposure to either opportunities in or competition from urban or foreign markets. That meant that the “competitiveness” debate, common in