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Perpetuation of subsistence farming in Western Balkans: the role of factor market imperfections

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  • Latruffe, Laure
  • Davidova, Sophia
  • Desjeux, Yann

Abstract

The paper analyses the imperfections in output and factor markets in Kosovo that act as a barrier to farm commercialisation. On the one hand, agricultural households may not have access to output market due to an underdeveloped downstream sector. On the other, local producers might not be preferred to importers as their production level is small with a variable quality due to constraints in factor markets. Data from the Agricultural Household Survey 2005 are used. A conceptual framework is developed on the basis of a household model where non-separability results from a “wedge” between purchase and sale prices due to transaction costs. The share of the output sold in the total value of output is regressed over a set of explanatory variables. A truncated regression is employed due to the high percentage of the dependent variable having the value of zero. Many of the observations do not contain all three factor prices - land rent, wages and interest. For this reason three separate regressions are run, each containing one of the prices. The model including wages is non-separable. Households with more members sell less as they have preferences for household needs. This calls for active rural development and educational policy which can create labour opportunities for agricultural households.

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File URL: http://purl.umn.edu/36860
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Bibliographic Info

Paper provided by Agricultural Economics Society in its series 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK with number 36860.

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Date of creation: 30 Mar 2008
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Handle: RePEc:ags:aes008:36860

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Related research

Keywords: subsistence farming; agricultural households; separability; market imperfections; Kosovo; Q12;

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  1. Newey, Whitney K., 1987. "Efficient estimation of limited dependent variable models with endogenous explanatory variables," Journal of Econometrics, Elsevier, vol. 36(3), pages 231-250, November.
  2. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
  3. John Lingard, 2003. "A Comparative Advantage Analysis of Kosovan Agriculture," Post-Communist Economies, Taylor & Francis Journals, vol. 15(3), pages 417-434.
  4. J. Taylor & Irma Adelman, 2003. "Agricultural Household Models: Genesis, Evolution, and Extensions," Review of Economics of the Household, Springer, vol. 1(1), pages 33-58, January.
  5. Philip Kostov & John Lingard, 2004. "Subsistence Agriculture in Transition Economies: Its Roles and Determinants," Journal of Agricultural Economics, Wiley Blackwell, vol. 55(3), pages 565-579.
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Cited by:
  1. Sauer, Johannes & Davidova, Sophia & Latruffe, Laure, 2009. "Determinants of the Fallowing Decision in Kosovo," 83rd Annual Conference, March 30-April 1, 2009, Dublin, Ireland 51072, Agricultural Economics Society.
  2. Sauer, Johannes & Davidova, Sophia & Latruffe, Laure, 2009. "Determinants for fallowing land: The case of Kosovo," 2009 Conference, August 16-22, 2009, Beijing, China 51626, International Association of Agricultural Economists.

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