The Impact of Non-Farm Employment on the Relative Income Deprivation of Rural Households: Evidence from Southwest China

The narrowing of the internal income inequality in rural areas is of great significance to the realization of common prosperity. However, there are few studies that measure income inequality among rural households at the individual level. This paper selected relative deprivation as the proxy variable for income inequality and used data from a deeply impoverished region to analyze the impacts of non-farm employment on income inequality. It was found that non-farm employment significantly reduced relative income deprivation and the effect was stronger for higher income groups. In terms of income structure, the effect of non-farm employment on narrowing relative wage income deprivation was more pronounced. The heterogeneity analysis revealed that as the age of the household head increased, the effect of non-farm employment on narrowing relative deprivation became more prominent. These findings provide a path to shared prosperity in rural developing economies.