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The Effects of Transaction Costs on Labor Market Participation and Earnings: Evidence from Rural Philippines Markets

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  • Lanzona, Leonardo
  • Evenson, Robert E.

Abstract

The paper aims to measure transaction costs and its effects on labor market participation and on wage earnings. The observed differences between buying and selling prices of rice across households are used to calculate transaction costs indices for villages which are incorporated into the standard labor market participation and Mincer wage equations. The estimates indicate that transaction costs may be a source of the income differentials between (a) the landed and the landless, (b) the rural and the urban areas, and (c) the males and the females. Furthermore, biases can be noted in the regression coefficients of estimates that do not control for transaction costs.

Suggested Citation

  • Lanzona, Leonardo & Evenson, Robert E., 1997. "The Effects of Transaction Costs on Labor Market Participation and Earnings: Evidence from Rural Philippines Markets," Center Discussion Papers 28465, Yale University, Economic Growth Center.
    • Handle: RePEc:ags:yaleeg:28465
    DOI: 10.22004/ag.econ.28465
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    File URL: https://ageconsearch.umn.edu/record/28465/files/dp970790.pdf
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    References listed on IDEAS

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    1. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602, Elsevier.
    2. Mark R. Rosenzweig & Kenneth I. Wolpin, 1985. "Specific Experience, Household Structure, and Intergenerational Transfers: Farm Family Land and Labor Arrangements in Developing Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(Supplemen), pages 961-987.
    3. Evenson, Robert & Roumasset, James, 1986. "MARKETS, institutions and family size in rural Philippine households," MPRA Paper 13227, University Library of Munich, Germany.
    4. repec:eee:labchp:v:1:y:1986:i:c:p:525-602 is not listed on IDEAS
    5. Hanan G. Jacoby, 1993. "Shadow Wages and Peasant Family Labour Supply: An Econometric Application to the Peruvian Sierra," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 903-921.
    6. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Two-Tier Labor Markets in Agrarian Economies," American Economic Review, American Economic Association, vol. 75(1), pages 162-177, March.
    7. Lanzona, L.A., 1995. "Migration Decisions, Self-Selection and Earnings in Low-Income Philippine Communities," Papers 747, Yale - Economic Growth Center.
    8. Otsuka, Keijiro & Hayami, Yujiro, 1988. "Theories of Share Tenancy: A Critical Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 37(1), pages 31-68, October.
    9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 31(3), pages 129-137.
    10. Lanzona, Leonardo A., 1998. "Migration, self-selection and earnings in Philippine rural communities," Journal of Development Economics, Elsevier, vol. 56(1), pages 27-50, June.
    11. repec:phd:pjdevt:jpd_1986_vol._xiii_nos._1&2-f is not listed on IDEAS
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    Cited by:

    1. Evenson, Robert E. & Kimhi, Ayal & Desilva, Sanjaya, 2000. "Supervision And Transaction Costs: Evidence From Rice Farms In Bicol, The Philippines," 2000 Annual meeting, July 30-August 2, Tampa, FL 21788, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. 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.
    3. Evenson, Robert E. & Kimhi, Ayal & Desilva, Sanjaya, 2000. "Supervision And Transaction Costs: Evidence From Rice Farms In Bicol, The Philippines," 2000 Annual meeting, July 30-August 2, Tampa, FL 21788, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Ricky P. Laureta & Ric Ryan H. Regalado & Ermar B. De La Cruz, 2021. "Climate vulnerability scenario of the agricultural sector in the Bicol River Basin, Philippines," Climatic Change, Springer, vol. 168(1), pages 1-18, September.
    5. Sanjaya DeSilva, 2011. "Access to Markets and Farm Efficiency: A Study of Rice Farms in the Bicol Region, Philippines," Economics Working Paper Archive wp_687, Levy Economics Institute.
    6. Mujawamariya, G. & Burger, K. & D’Haese, M., 2015. "Market-driven production with transaction costs outlook: Gum arabic collection systems in Senegal," Journal of Forest Economics, Elsevier, vol. 21(3), pages 111-130.

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    More about this item

    Keywords

    Labor and Human Capital;

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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