THE ROLE OF EDUCATION IN AGRICULTURAL OUTPUT AND LABOR ALLOCATION: A CASE STUDY OF RURAL PAKISTAN

Abstract

The purpose of this study is to highlight the impact of education on farm activity (Productivity) given the movement of labor (Labor allocation) from off-farm to on-farm. Therefore, this study aims to assess the labor allocation across the farm and off-farm activity by considering human capital (level of education attained). This sector contributes 20.71% to the GDP of Pakistan. However, the contribution of the agriculture sector in GDP has shrunk from 27% in 2000-01 to 19% in 2018-19. Mostly the skilled or individuals with some human capital investment allocate their labor to nonfarm activity instead of in farm activity. Hence allocation of labor specifically skills labor in agriculture/ farm activity matters. In this study, only rural areas are focused on analyzing the objectives of this research. For estimation purposes, OLS, Heckman Selection Technique (two-stage method) is used. Furthermore, Probit is employed for evaluating the marginal effects of the coefficients for understanding the true meaning. Results indicate that wage differential, dependency ratio, educational level, and unemployment in educational level are showing a mixed trend toward farm activity. The wage differential is positive and significantly related to farm activity, which indicates that when off-farm wages increase, individuals move toward the off-farm activity. Unemployment at the educational level is negatively related to farm activity. Physical input and cultivated land show a negative impact on farm wages. Whereas human capital, land tenure, access to water, and livestock are positively related to it. The study suggested that it is necessary to increase the enrolment rate at all education levels so education-based policies should be introducing. Policies should be introduced that provide technical training related to farm equipment and skills. It helps those farmers that are uneducated and having less knowledge. Livestock is an asset for the farmworkers. The policies should be introduced to the farmers to have healthy and better upbringing facilities.