The Role of Farming Efficiency in Rural Transformation: Insights From Long‐Term Panel Data for Thailand

ABSTRACT Rural transformation is important for economic growth and is characterised by the reallocation of labour from farm to non‐farm sectors. However, there is limited evidence on how farming efficiency affects rural transformation at the household level. In this study, we explore the effects of farming efficiency on rural transformation and investigate the influence of farming efficiency on the shift from full‐time to part‐time farming at the smallholder farm level. We use panel data from the Thailand–Vietnam Socio‐economic Panel. Our sample includes 10,549 observations collected in Thailand from seven survey waves between 2007 and 2019. Our results reveal that farming efficiency positively and significantly affects the share of farm income, per capita farm income and per hectare agricultural machinery expense, while it has a negative and significant effect on the share of non‐farm income, per capita non‐farm income and the share of livestock income in farm income. These results imply that more efficient farmers tend to stick to farming and apply mechanisation in crop production, while less efficient ones seem to shift to non‐farm sectors. Policies designed to encourage farm enlargement and labour allocation to accelerate rural transformation are recommended.