Opportunity Cost of Education on Non-Farm Employment in Rural Nigeria

Abstract

Purpose: Returns on education was found to be worker, scale and allocative effects with positive higher payoff to agricultural productivity but its effects on non-farm employment among agricultural households who obtain income through non-farm activities to complement proceeds of agricultural activities are not yet known. Therefore, this study critically investigates the real cost effect of education on involvement in non-farm employment among rural households in Southwestern Nigeria. Research Method: The study drew a sample of 411 rural farm households through a multi-stage sampling technique from three states in southwest Nigeria and the data obtained were analyzed using the Mincerian equation, logistic model, inverse of Herfindahl index, calculation of expected annual rural income earning and rates of return to schooling. Findings: Results indicate that mean age and education of the rural household heads were 49.9 years and 8.8 years respectively while the household incomes were diversified up to 2.82 level and the nonfarm sources contributed an average of 67% of the total income. Education is found to have considerable returns of N4706.30 (US$31.95) to gross household income and an additional year of schooling from other members of the households returns of N12519.90 (US$85) to the households' income. Education of the household heads increases the probability of farm households participating in rural non-farm employment but the probability of participation reduces with increased level of education of the household heads. Tertiary education has the highest opportunity costs of schooling (N352200.04) per annum and the lowest rate of return to schooling (0.57%) from rural non-farm employment. Research Limitations: The study revealed the real cost of rural farm households' educational level on the type of non-farm employment and income generated through it. The study presents information on southwestern zone of Nigeria. Originality/Value: The practical value of this research is that decline rates of return to higher education reveal the rural non-farm employment being not the prime incentive for rural farm households' members in obtaining higher education in rural southwest Nigeria. Therefore, implications are drawn for an integrated approach to higher education which may yield agricultural and non-agricultural transformation in rural Nigeria.