The impact of non-farm activities on agricultural investment in vietnam: The difference made by credit constraints levels

Abstract

This paper examines the impacts of non-farm activities on farm inputs investment decisions across six regions in Vietnam using the Vietnam Household Living Standards Survey. Results suggest that although income from non-farm activities contributes to relaxing credit constraints among farmers, such alleviation does not necessarily allow farmers to increase their on-farm investments. We found that in the developed regions where farmers participate and earn more from non-farm activities, despite there being a low level of credit constraints, their investment in agriculture is still limited due to the labour constraints of the farm household. In contrast, in the less developed regions, where farmers have less access to non-farm income sources, they tend to invest their non-farm income in on-farm activities. The article contributes to the literature by showing that differ-ences in credit constraints levels lead to variations in farm households’ decisions on whether or not to direct non-farm income towards investment in agricultural production.