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Production Choices of Farm Households: Institutional and Behaviourial Aspects in Economic Theory


  • Mariapia Mendola


This paper reviews the main theoretical and empirical contributions analysing production choices of farm households in the developing countries, where the markets are imperfect and incomplete. Recent developments in the micro-economic literature have highlighted the existence of a trade-off between the income risk and expected returns to investments for households taking production decisions in imperfect and incomplete markets. In particular, farm households tend to invest in low-risk, low-return activities; and in some cases, poorly endowed, risk-averse farm households might even be caught in a poverty-trap, as they are unable to accumulate savings and make profitable investments to escape poverty.

Suggested Citation

  • Mariapia Mendola, 2006. "Production Choices of Farm Households: Institutional and Behaviourial Aspects in Economic Theory," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
  • Handle: RePEc:rar:journl:0035

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    References listed on IDEAS

    1. Michael Kremer & Edward Miguel & Rebecca Thornton, 2009. "Incentives to Learn," The Review of Economics and Statistics, MIT Press, vol. 91(3), pages 437-456, August.
    2. Eswaran, Mukesh & Kotwal, Ashok, 1989. "Credit as insurance in agrarian economies," Journal of Development Economics, Elsevier, vol. 31(1), pages 37-53, July.
    3. Mendola, Mariapia, 2008. "Migration and technological change in rural households: Complements or substitutes?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 150-175, February.
    4. Bliss, C. J. & Stern, N. H., 1982. "Palanpur: The Economy of an Indian Village," OUP Catalogue, Oxford University Press, number 9780198284192.
    5. Bardhan, Pranab & Udry, Christopher, 1999. "Development Microeconomics," OUP Catalogue, Oxford University Press, number 9780198773719.
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    More about this item


    Farm Households; Production Choices; Income-Smoothing; Poverty;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products


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