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Smallholders, Market Failures, and Agricultural Production: Evidence from India

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  • Merfeld, Joshua D.

    (KDI School of Public Policy and Management)

Abstract

Market completeness has important implications for household behavior. I firmly reject complete markets for smallholders but am unable to do so for non-smallholders. This leads to important differences in production behavior: smallholders reallocate labor across activities less in response to intra-seasonal crop price changes than do non-smallholders. A counterfactual exercise indicates smallholders could increase revenue by almost nine percent if they were to reallocate labor similarly to non-smallholders. The overall pattern of results is consistent with small-holders lacking sufficient wage employment opportunities. Since non-smallholders have to hire in for agricultural production, this lack of opportunities does not affect their decisions.

Suggested Citation

  • Merfeld, Joshua D., 2020. "Smallholders, Market Failures, and Agricultural Production: Evidence from India," IZA Discussion Papers 13682, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp13682
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    Cited by:

    1. Merfeld, Joshua D., 2021. "Sectoral Wage Gaps and Gender in Rural India," IZA Discussion Papers 14391, Institute of Labor Economics (IZA).
    2. Radha R. Ashrit, 2023. "Estimation of technical efficiency of Indian farms for major crops during 2013–2014 and 2017–2018: a stochastic Frontier production approach," SN Business & Economics, Springer, vol. 3(2), pages 1-32, February.

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    More about this item

    Keywords

    markets; market failures; agriculture; labor;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness

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