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Rural Household Labour Demand, Contract Choice, Hoarding Cost and Poverty: Evidence from Western Kenya

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  • Gathungu, E.
  • Musyoka, M.P.
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    Abstract

    This study determines the factors that influenced contract choice, labour demand and examines the existence of labour hoarding practice in Western region of Kenya. Data from Egerton University’s Tegemeo Institute of Agricultural Policy and Development was used for the analysis.. A two step Heckman model was employed to estimate the extent of engagement in daily and semi-permanent contracts conditional on choice of contract. Results from the study show that casual and semi-permanent contracts are substitutes. Family labour negatively influences engagement in daily and semi-permanent contracts hence it is a substitute to the two forms of the contracts. Increase in wages paid to casual contracts is negative and significant to the extent of daily contract engagement but positive and significant to semi-permanent contracts supporting the substitutability of daily contracts for semi-permanent contracts. Methods and costs of farm preparation are significant in influencing the choice and demand for any type of contracts. The proxy variable for hoarding costs is significant and positive indicating that there are hoarding costs incurred in the maintaining a steady pool of labour within the farm. From the results the relatively asset poor farmers engage in the wage high daily contracts to avoid incurring hoarding costs as indicated by the dummy denoting poverty level. However, to avoid uncertainty during peak periods semi-permanent contracts are highly employed by the asset poor farmers. From the results, farmers willing to minimize hoarding costs may find themselves substituting family labour for daily contracts or in absence of family labour, semi-permanent contracts for daily contracts.

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    Bibliographic Info

    Paper provided by African Association of Agricultural Economists (AAAE) in its series 2007 Second International Conference, August 20-22, 2007, Accra, Ghana with number 52159.

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    Date of creation: Nov 2008
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    Handle: RePEc:ags:aaae07:52159

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    Postal: c/o FORMAT, 5th Floor, Muthaiga Mini Market, Limuru Road, P.O. Box 79 - 00621 Village Market, Nairobi, Kenya
    Phone: 254 20 6752866
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    Web page: http://www.aaae-africa.org
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    Related research

    Keywords: Contracts; Kenya; Labour; Policy; Agricultural and Food Policy; Consumer/Household Economics; Environmental Economics and Policy; Farm Management; Food Consumption/Nutrition/Food Safety; Food Security and Poverty; Institutional and Behavioral Economics; Labor and Human Capital; Land Economics/Use; Productivity Analysis; Research and Development/Tech Change/Emerging Technologies;

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    1. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
    2. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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