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Transaction Costs and Institutional Innovations in Agricultural Labor Contracts

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  • Frisvold, George B.

Abstract

This paper develops and econometrically tests a model of labor contractual choice in developing countries, focusing on the choice between directly hiring labor on a spot market versus reliance on labor contractors. The theoretical model examines the role of market prices and factor endowments on contract choice and the role of labor contracting as an institutional innovation to reduce transactions costs associated with the use of hired labor. Econometric results confirm hypotheses that contracting becomes more profitable as farm size and collateral ownership increase, as family size decreases, and with tightening of the casual labor market.

Suggested Citation

  • Frisvold, George B., 2005. "Transaction Costs and Institutional Innovations in Agricultural Labor Contracts," 2005 Annual meeting, July 24-27, Providence, RI 19495, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19495
    DOI: 10.22004/ag.econ.19495
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    References listed on IDEAS

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    1. Kikuchi, Masao & Hayami, Yujiro, 1980. "Inducements to Institutional Innovations in an Agrarian Community," Economic Development and Cultural Change, University of Chicago Press, vol. 29(1), pages 21-36, October.
    2. Barnum, Howard N. & Squire, Lyn, 1979. "An econometric application of the theory of the farm-household," Journal of Development Economics, Elsevier, vol. 6(1), pages 79-102, February.
    3. P. N. Junankar, 1978. "Profit Maximization: Translog Functions applied to Indian Agriculture," Working Paper 313, Economics Department, Queen's University.
    4. Hart, Gillian, 1986. "Interlocking transactions : Obstacles, Precursors or Instruments of Agrarian Capitalism?," Journal of Development Economics, Elsevier, vol. 23(1), pages 177-203, September.
    5. Calvo, Guillermo A & Wellisz, Stanislaw, 1979. "Hierarchy, Ability, and Income Distribution," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 991-1010, October.
    6. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-367, June.
    7. Bowles, Samuel, 1985. "The Production Process in a Competitive Economy: Walrasian, Neo-Hobbesian, and Marxian Models," American Economic Review, American Economic Association, vol. 75(1), pages 16-36, March.
    8. Roumasset, James & Uy, Marilou, 1980. "Piece rates, time rates, and teams : Explaining patterns in the employment relation," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 343-360, December.
    9. Lipton, Michael, 1976. "Agricultural finance and rural credit in poor countries," World Development, Elsevier, vol. 4(7), pages 543-553, July.
    10. Lipton, Michael, 1980. "Migration from rural areas of poor countries: The impact on rural productivity and income distribution," World Development, Elsevier, vol. 8(1), pages 1-24, January.
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    Cited by:

    1. Cuevas, Agham C., 2014. "Transaction Costs of Exchange in Agriculture: A Survey," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 11(1), pages 1-18, June.

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