Spatial spillovers and households’ involvement in the non-farm sector: evidence from rural Rwanda.

This paper tests for external effects of local economic activity on non-farm income using survey data from Rwanda. The empirical analysis uses a random sample of 8071 households and a multilevel model to mitigate correlations between individual outcomes and geographical variables. Findings show a positive association between a higher initial local diversity of economic activity and non-farm earnings. Results also point to the importance of access to markets and services indicating that an important part of a household's capacity to earn non-farm income is associated with factors that are external to the household.