Asset endowments, non‐farm participation and local separability in remote rural China

The aim of this paper is to address a local separability character partly identified by non‐farm participation behaviors in the context of multiple market imperfections.

The paper develops a model to analyze agricultural household's non‐farm participation based on heterogeneous asset endowments. The model is applied to recent data from Zhouzhi, a mountainous county in rural western China.

The paper shows that human capital, social capital and other capital assets have significant but different effects on the agricultural household's participation in non‐farm activities, and they help to break down non‐farm labor constraints. Nonseparability holds only for those households unable to participate in non‐farm activities due to poor asset endowments.

The agricultural household model developed in this paper and its application in China provide insights into theory and empirical analysis of agricultural households' behavior and rural development.