Returns from Income Strategies in Rural Poland. Factor Markets Working Document No. 64, August 2013

In order to stabilise and improve their income situation, rural households are strongly encouraged to diversify their activities both within and outside the agricultural sector. Often, however, this advice is only moderately pursued. This paper addresses issues of rural household income diversification in the case of Poland. It investigates returns from rural household income strategies using propensity score matching methods and extensive datasets spanning 1998-2008. Results suggest that returns from combining farm and off-farm activities were lower than returns from concentrating on farming or on self-employment outside agriculture. This differential is stable over time although returns from diversification have relatively improved after Poland’s accession to the EU. This is also visible in the fact that since 2006 returns from combining farm and off-farm activities have evened with returns from relying solely on hired off-farm labour, thus smoothing the difference observed before the accession. Further, over the analysed period, households pursuing the diversification strategy performed better than those relying solely on unearned income. Finally, in general, the income in households combining farm and off-farm activities was higher than in those combining two off-farm income sources.