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Shadow wages, allocative inefficiency, and labor supply in smallholder agriculture

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  • Christopher B. Barrett
  • Shane M. Sherlund
  • Akinwumi A. Adesina

Abstract

This article introduces a method for estimating structural labor supply models in the presence of unobservable wages and deviations of households' marginal revenue product of self-employed labor from their shadow wage. This method is therefore robust to a wide range of assumptions about labor allocation decisions in the presence of uncertainty, market frictions, locational preferences, etc. We illustrate the method using data from rice producers in C�te d'Ivoire. These data, like previous studies, reveal significant systematic differences between shadow wages and the marginal revenue product of family farm labor. We demonstrate how one can exploit systematic deviations, in the present case related to household characteristics such as the land/labor endowment ratio, to control for both unobservable wages and prospective allocative inefficiency in labor allocation in structural household labor supply estimation. Copyright 2008 International Association of Agricultural Economists.

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Bibliographic Info

Article provided by International Association of Agricultural Economists in its journal Agricultural Economics.

Volume (Year): 38 (2008)
Issue (Month): 1 (01)
Pages: 21-34

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Handle: RePEc:bla:agecon:v:38:y:2008:i:1:p:21-34

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Cited by:
  1. Alex Almeida & Boris Bravo-Ureta, 2011. "Agricultural Productivity And Off-Farm Labor Decisions By Heads And Spouses In Nicaragua: A Semiparametric Analysis Using Panel Data," ERSA conference papers ersa11p508, European Regional Science Association.
  2. Chikwama, Cornilius, 2010. "The role of rural off-farm employment in agricultural development among farm households in low-income countries: Evidence from Zimbabwe," Journal of Cooperatives, NCERA-210, vol. 4(1), March.
  3. Stifel, David, 2010. "The rural non-farm economy, livelihood strategies and household welfare," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 4(1), March.
  4. Sauer, Johannes & Balint, Borbala, 2006. "Romanian Maize - Distorted Prices and Producer Efficiency," 2006 Annual meeting, July 23-26, Long Beach, CA 21410, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Bezu, Sosina & Barrett, Christopher B. & Holden, Stein T., 2010. "Does the nonfarm economy offer pathways for upward mobility? Evidence from a panel data study in Ethiopia," MPRA Paper 35754, University Library of Munich, Germany, revised 2011.
  6. Hernandez, Ricardo & Berdegue, Julio A. & Reardon, Thomas, 2012. "Modern Markets and Guava Farmers in Mexico," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 127649, International Association of Agricultural Economists.
  7. Nafziger, Steven, 2010. "Peasant communes and factor markets in late nineteenth-century Russia," Explorations in Economic History, Elsevier, vol. 47(4), pages 381-402, October.
  8. Christopher Barrett & Daniel Clay, 2003. "How Accurate is Food-for-Work Self-Targeting in the Presence of Imperfect Factor Markets? Evidence from Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 39(5), pages 152-180.
  9. John Cockburn, 2004. "Income Contributions of Child Work in Rural Ethiopia," Development and Comp Systems 0409016, EconWPA.
  10. Palacios-López, Amparo & López, Ramon E., 2014. "Gender Differences in Agricultural Productivity: The Role of Market Imperfections," Working Papers 164061, University of Maryland, Department of Agricultural and Resource Economics.

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