Permalink : http://hdl.handle.net/2115/77105

KEYWORDS : Vietnam;non-farm sector;agricultural input expenditure;credit constraint;liquidity constraint

This study examines the relation between farm household participation in non-farm activities and agricultural expenditures in Vietnam. We assess the expenses for purchased inputs (such as seeds, fertilizer, breed, feed, herbicide, and pesticide), hired machines, and hired labor by using data from the Vietnam Living Standards Survey 2012. The Instrumental Variables (IV) Tobit aproach is applied in our study to obtain a corner solution for the dependent variables and treat the endogeneity problem. We find that household participation in the non-farm sector has a positive and significant impact on agricultural expenses. The results of the average partial effect of non-farm income on agricultural inputs expenses indicate that an additional VND of non-farm income leads to a 0.412 VND increase in agricultural inputs spending. However, our findings show that farm households only use a small proportion of the non-farm income for hiring machines and labor. The results also indicate that the earnings from non-farm activities could relax liquidity constraints through investments in agricultural production. This suggests the existence of a significant synergy between agriculture and non-farm sectors.