How Important are Locational Characteristics for Rural Non-agricultural Employment? Lessons from Brazil

By paying particular attention to the local economic context, this paper analyzes the factors that influence rural non-agricultural employment and earnings. The empirical analysis is based on the Brazilian Demographic Census, allowing for disaggregated controls for the local economy. Education stands out as one of the key factors that shape employment outcome and earnings potential. Failure to control for locational effects, however, can lead to biased estimation of the importance of individual and household characteristics. The empirical results show that local market size, distance to population centers, and other proxies for transactions costs play an important role in shaping non-agricultural employment prospects and earnings.