Impact of Rural Non-Farm Employment on Income and Poverty Alleviation in Uttar Pradesh: A Propensity Score Matching Analysis

This study investigates the causal impact of Rural Non-Farm Employment (RNFE) on household income and consumption in rural Uttar Pradesh (UP), India, a region facing persistent poverty and agrarian distress. The objective is to assess whether engagement in non-farm economic activities significantly enhances rural welfare outcomes, thereby providing an effective avenue for poverty alleviation. The novelty of this research lies in its state-specific focus on UP, a region often neglected in national studies, and its application of a counterfactual framework to rigorously estimate causal effects using observational data. This study utilizes unit-level data from the Periodic Labour Force Survey (PLFS) 2019–20. To mitigate concerns related to selection bias and endogeneity, the analysis employs the Propensity Score Matching (PSM) technique, incorporating both Nearest Neighbour Matching (NNM) and Kernel-Based Matching (KBM) approaches. The results show that RNFE participation raises monthly per capita income by ₹412 (NNM) and ₹416.8 (KBM), and increases monthly per capita consumption expenditure by ₹97, compared to agricultural workers. These effects place RNFE participants significantly above the poverty line, reinforcing the role of RNFE in poverty alleviation. Importantly, the study finds that regional disparities persist within UP, with Western UP benefiting more due to possibly better-quality non-farm jobs. The findings underscore the need for region-specific employment strategies that improve the quality, accessibility, and inclusiveness of RNFE. By offering robust empirical evidence, this research contributes to the broader discourse on rural transformation and supports more effective, evidence-based rural development policy in India. JEL Classification: J21, J240, J43, J46