This paper explores the effects of labour movement into nonfarm activities on household production choices in rural Vietnam. It finds that agricultural production declines and there are negative effects on farm revenue. However, these conclusions are limited in the North. Households in the North readjust their production structure by investing in livestock and other crops that require less labour. | VNU Journal of Science: Economics and Business, Vol. 33, No. 5E (2017) 57-69 Nonfarm Activities and Household Production Choices in Smallholder Agriculture in Vietnam Nguyen Quynh Huy* National Academy of Public Administration, 77 Nguyen Chi Thanh Str., Dong Da Dist., Hanoi, Vietnam Received 01 December 2017 Revised 19 October 2017; Accepted 28 December 2017 Abstract: This paper explores the effects of labour movement into nonfarm activities on household production choices in rural Vietnam. It finds that agricultural production declines and there are negative effects on farm revenue. However, these conclusions are limited in the North. Households in the North readjust their production structure by investing in livestock and other crops that require less labour. Rice farmers in the South have managed to keep their rice production unaffected by hiring more labour, and investing more capital to switch to less labourintensive farming. Evidence of relaxing liquidity constraints is found, at least in the short run. While the decline in agricultural revenue in the north suggests some level of substitution between farming and nonfarm activities, the stability in rice production at the national level brings good news to policy makers and for food security despite rapid structural change over the past decades. Keywords: Nonfarm, food security, rice self-sufficiency, agricultural transformation, household agricultural production. 1. Introduction Although the participation of household labour into nonfarm activities is a primary feature of the economic structural transformation process [1], the potential impacts of this process on agriculture can be quite complex. Economic theories show ambiguous predictions in terms of the magnitude or signs of the effects [5]. If farm households cannot substitute for nonfarm labour due to liquidity constraints, labour movement into nonfarm activities could result in the reduction of agricultural production. Alternatively, farm households
