The effect of infrastructure access and quality on non-farm enterprises in rural Indonesia

Abstract

There is growing interest in the rural non-farm sector in developing countries as a contributor to economic growth, employment generation, livelihood diversification, and poverty reduction. Access to infrastructure is identified in some studies as a factor that affects non-farm rural employment and income but less attention has been paid to the constraints imposed by poor quality infrastructure. In this paper, we use data from 4,000 households in rural Indonesia to show that the quality of two key types of infrastructure—roads and electricity—affects both employment in and income from non-farm enterprises. It appears that there would be gains from development strategies that improve both the access to and the quality of rural infrastructure.