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Modeling Farm Households' Price Responses in the Presence of Transaction Costs and Heterogeneity in Labor Markets

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  • Christian H.C.A. Henning
  • Arne Henningsen

Abstract

We develop a farm household model to analyze price responses of farm households. This model incorporates various types of transaction costs as well as labor heterogeneity. Nonproportional variable transaction costs or labor heterogeneity imply that production and consumption decisions become nonseparable, even when the household buys or sells labor. An empirical model is estimated using data from Midwest Poland. The results show that nonproportional variable transaction costs and labor heterogeneity significantly influence household behavior. Not all price elasticities, however, change significantly if these are neglected. Copyright 2007, Oxford University Press.

Suggested Citation

  • Christian H.C.A. Henning & Arne Henningsen, 2007. "Modeling Farm Households' Price Responses in the Presence of Transaction Costs and Heterogeneity in Labor Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 665-681.
  • Handle: RePEc:oup:ajagec:v:89:y:2007:i:3:p:665-681
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.00980.x
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    Cited by:

    1. Md. Shafiul Azam & Katsushi S. Imai & Raghav Gaiha, 2012. "Agricultural Supply Response and Smallholders Market Participation – the Case of Cambodia," Discussion Paper Series DP2012-09, Research Institute for Economics & Business Administration, Kobe University.
    2. Luca Tiberti & Marco Tiberti, 2015. "Rural Policies, Price Change and Poverty in Tanzania: An Agricultural Household Model-Based Assessment," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(2), pages 193-229.
    3. Henningsen, Arne & Kumbhakar, Subal C. & Lien, Gudbrand D., 2009. "Econometric Analysis of the Effects of Subsidies on Farm Production in Case of Endogenous Input Quantities," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49728, Agricultural and Applied Economics Association.
    4. Muriithi, Beatrice W. & Matz, Julia Anna, 0. "Smallholder Participation in the Commercialisation of Vegetables: Evidence from Kenyan Panel Data," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 53.
    5. Chen, Qiu & Mirzabaev, Alisher, 2016. "Evaluating the Impacts of Traditional Biomass Energy Use on Agricultural Production in Sichuan, China," Discussion Papers 250213, University of Bonn, Center for Development Research (ZEF).
    6. Francesca MARCHETTA & David SAHN & Luca TIBERTI, 2018. "School or work? The role of weather shocks in Madagascar," Working Papers 201803, CERDI.
    7. Louhichi, Kamel & Gomez y Paloma, Sergio, 2014. "A farm household model for agri-food policy analysis in developing countries: Application to smallholder farmers in Sierra Leone," Food Policy, Elsevier, vol. 45(C), pages 1-13.
    8. Takeshima, Hiroyuki & Winter-Nelson, Alex, 2010. "Sales location and supply response among semisubsistence farmers in Benin," IFPRI discussion papers 999, International Food Policy Research Institute (IFPRI).
    9. Zhen Liu & Arne Henningsen, 2016. "The effects of China's Sloping Land Conversion Program on agricultural households," Agricultural Economics, International Association of Agricultural Economists, vol. 47(3), pages 295-307, May.
    10. Takeshima, Hiroyuki, 2008. "Behavior of subsistence producers in response to technological change- The elasticity of cassava production and home consumption in Benin," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6108, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    11. Eleonora Matteazzi & Martina Menon & Federico Perali, 2017. "The Collective Farm-household Model: Policy and Welfare Simulations," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 39(1), pages 111-153.
    12. Arne Henningsen, 2009. "Why is the Polish farm sector still so underdeveloped?," Post-Communist Economies, Taylor & Francis Journals, vol. 21(1), pages 47-64.
    13. Parisa Aghajanzadeh-Darzi & Pierre-Alain Jayet & Athanasios Petsakos, 2017. "Improvement of a Bio-Economic Mathematical Programming Model in the Case of On-Farm Source Inputs and Outputs," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(3), pages 489-508, September.

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