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Income Targeting and Farm Labor Supply

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  • Timothy J. Richards

Abstract

There is considerable anecdotal evidence that farm workers who are paid by piece rate tend to “income target,” or work only until they achieve a certain amount of daily income, and then stop work. We estimate reduced‐form and structural models derived from the reference‐dependent preference model of Koszegi and Rabin (2006) to test the income‐targeting hypothesis using data from the National Agricultural Workers Survey (NAWS). We find evidence that supports the income‐targeting hypothesis, in both the reduced‐form and structural econometric models. Our findings suggest that even higher piece rates may not help the widely reported shortage of agricultural labor on the intensive margin as labor‐supply curves can be backward bending.

Suggested Citation

  • Timothy J. Richards, 2020. "Income Targeting and Farm Labor Supply," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(2), pages 419-438, March.
  • Handle: RePEc:wly:ajagec:v:102:y:2020:i:2:p:419-438
    DOI: 10.1002/ajae.12032
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    1. Alexandra E. Hill & Jesse Burkhardt, 2021. "Peers in the Field: The Role of Ability and Gender in Peer Effects among Agricultural Workers," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(3), pages 790-811, May.
    2. Cho, Seung Jin & Lee, Jun Yeong & Winters, John V., 2020. "COVID-19 Employment Status Impacts on Food Sector Workers," ISU General Staff Papers 202006080700001107, Iowa State University, Department of Economics.

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