The radical changes that have occurred in the Romanian economy during the last decade have created new pressures on the country's rural areas. Increasing industrial unemployment generated an urban-rural migratory flow of the population. The collapse of the agri-industrial processing and industrial sector increased rural unemployment. Since 1991, land reform has also generated new relationships in rural areas, and a massive redistribution of land. However, agriculture continues to function inefficiently, and is unable to provide a decent and sustainable standard of living for most rural inhabitants. Therefore, many donors and multilateral agencies are focusing on the potential of the rural non-farm economy (RNFE) and more specifically, Non-Farm Diversification (henceforth NFD) to reduce rural underemployment. NFD through the development of the RNFE may also provide means of increasing rural incomes, assist the improved utilisation of locally available resources and promote a better standard of living for rural population through enhanced non-farm employment opportunities and growth. There are several reasons underlying the rural poor decision to diversify: low on-farm incomes or returns on labour, the existence of a surplus of resources (land, capital, labour or knowledge), as a strategy to spread risk, or to smooth the impact of the fluctuations in a unique source of income (e.g. agriculture). The present paper relies on community-level data from a survey conducted in two Romanian Counties, Dolj and Brasov, to analyse the main determinants of NFD in rural areas. The main findings are placed in a national context and policy proposals are advanced.
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