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Demographic and structural effects on labor demand in incomplete markets: Testing “Separability Hypothesis” in Turkish agricultural labor market


  • Perihan Özge SAYGIN

    (IMT Lucca Institute for Advanced Studies)

  • Selim ÇAĞATAY

    (Akdeniz Universitesi)


Complete markets play an important role in terms of farmers’ response to price incentives and efficient resource allocation. The existence of market failures in rural labor markets can be tested by examining whether the quantity of labor demand is influenced by the household characteristics. By applying existing approaches to separability tests in the literature with a rich rural household survey, this paper suggests that the household characteristics in rural Turkey have an impact on labor demand. Further, we link the nonseparability to some well-known structural problems of Turkish agriculture such as hidden unemployment and small and segmented lands creating constraints on economic decisions. According to our findings, the test fails to reject the separability for relatively larger farms and we do not reject separability for a sub-sample of households having off-farm employment opportunities.

Suggested Citation

  • Perihan Özge SAYGIN & Selim ÇAĞATAY, 2010. "Demographic and structural effects on labor demand in incomplete markets: Testing “Separability Hypothesis” in Turkish agricultural labor market," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 25(292), pages 71-95.
  • Handle: RePEc:iif:iifjrn:v:25:y:2010:i:292:p:71-95

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    More about this item


    Agricultural Household Models; Incomplete Labor Market; Small Scale; Agricultural Production; Shadow Wage; Separability Hypothesis;

    JEL classification:

    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets


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