FACULTEIT DER ECONOMISCHE WETENSCHAPPEN EN ECONOMETRIE

In th is paper a review is given of the role of small scale rural industry for regional development in developing countries, especially Indonesia. The role of industry in the rural economy is discussed. The factors influencing the participation of farm households in small-scale manufacturing ac t iv i-t ies are investigated. I t is found that th i s participation strongly depends on the conditions in the agricultural sector. Various subsectors in rural industry are distinguished, with different prospects for future develop-ment. Special attention i s paid to the equity aspects of rural industry. Rural industry appears to a very important source of income for the rural poor, but also rich farm households display substantial participaton in th is sector. Finally, conclusions are drawn with respect to government policies aiming at promoting rural industry. The general conclusion reads that small-scale rural industry will benefit most from a broadly based agricultural development and the abolition of a scale bias in industr ial