Facilitating or inhibiting? The impact of non-farm employment on high-value agriculture participation in Nepal

Purpose Non-farm employment has become an increasingly important component of rural livelihoods, shifting the future trajectory of agriculture, particularly the development of high-value agriculture (HVA). However, the relationship between non-farm employment and participation in HVA is theoretically ambiguous. Using Nepal's HVA development as a case, this study examines the relationship between non-farm employment and HVA participation among rural households, focusing on both the direct effects and the underlying mechanisms. Design/methodology/approach Using Nepal's National Sample Census of Agriculture 2021/22, this study applies a two-stage residual inclusion (2SRI) model to explore the effects, mechanisms, and heterogeneous performance of non-farm employment on three aspects of HVA participation: HVA adoption, HVA adoption intensity, and HVA crop diversity. The Sobel test further quantifies the mediating role of mechanization in this relationship. Findings The empirical findings indicate that non-farm employment generally reduces HVA adoption, HVA adoption intensity, and HVA crop diversity, reflecting fundamental trade-offs in labor allocation between non-farm employment and HVA participation. Agricultural mechanization emerges as a critical mechanism, with mechanized households showing higher HVA participation. The interaction effect analysis identified this finding. Furthermore, effects exhibit substantial heterogeneity—non-farm employment hinders HVA participation among households in hill and mountain areas, especially for adopting pulses, tubers, cash crops, and citrus. Non-farm employment creates paradoxical effects when agriculture constitutes secondary income (reducing HVA adoption probability and HVA adoption intensity while increasing HVA crop diversity). Originality/value This study provides a more comprehensive understanding of the relationship between non-farm employment and farmers' HVA adoption, HVA adoption intensity, and HVA crop diversity. Focusing on Nepal, it also examines the mediation effect of mechanization, broadening the literature on HVA in rural development and agricultural transformation in developing countries.