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We analyze the food security implications of off-farm labor reallocation decisions of rural farm households in transitional Albania. We accomplish this by examining local and nonlocal off-farm incomes for at-home food consumption expenditures.

An instrumental variable approach is employed to correct for endogeneity and censorship biases of off-farm income variables in a two-stage estimation of the food consumption expenditures.

We find that local off-farm income exerts a positive and significant effect on per capita food consumption expenditures of farm households, while private remittances from nonlocal off-farm income has the opposite effect on food consumption expenditures. In terms of regional heterogeneity, we discover that the mountain region spends significantly less on annual per capita food consumption compared to the central region. This confirms anecdotal evidence that food and nutrition insecurity in rural Albania is predominant in the mountain region.

Our findings suggest the need for policy makers to promote a development agenda that enables farm households to exploit the synergies among the various income-generating activities in the rural economy. This spectrum of income-generating activities forms complex livelihood strategies adopted by rural farm households to improve and maintain their food security.

We distinguish between local and nonlocal sources of off-farm income. Knowing which off-farm income source(s) has the largest impact on household welfare through improved food security status should be of interest to policy makers.