Mobile phones, off‐farm employment and household income in rural India

Abstract Rural households in developing countries often depend on agriculture for their livelihoods. However, many also pursue off‐farm economic activities either to complement their farm income or because they lack access to agricultural land. Rural off‐farm employment is often informal and temporary. Searching for jobs can be associated with high transaction costs, which may be a constraint on some households’ participation in off‐farm employment. The increasing spread of mobile phones may help to reduce these transaction costs. Here, we test the hypothesis that mobile phone ownership increases rural households’ participation in off‐farm employment and—through this mechanism—also improves household income. We use nationally representative panel data from rural India and regression models with household fixed effects to control for confounding factors and unobserved heterogeneity. We find that mobile phone ownership is positively associated with the likelihood of participating in various types of off‐farm employment, including casual wage labour, salaried employment and non‐agricultural self‐employment. This association is larger in female‐headed than in male‐headed households. The estimates also show that mobile phone ownership is positively associated with household income, partly channelled through the off‐farm employment mechanism.