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Are production risk and labour market risk covariant?

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  • Sunil Kanwar

    (Department of Economics, University of Delhi, Delhi, India)

Abstract

While in a given situation the production risk that farmers face may well be independent of the labour market risk, in general these may be highly related in the context of the local labour market. The strength of this relationship has important implications not only for the correct specification of the household model under risk, but also for addressing the issue whether the farm household can use the labour market as a hedge against production uncertainty. Clearly, if the two risks are covariant, the possibility of doing so may be very small. If, instead, they are independent, the farm household may avail of the local casual labour market to balance the production risk it faces. Using a large sample of farmers we find that labour market risk and production risk are not causally related in the Granger sense. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Sunil Kanwar, 1998. "Are production risk and labour market risk covariant?," Journal of International Development, John Wiley & Sons, Ltd., vol. 10(1), pages 129-146.
  • Handle: RePEc:wly:jintdv:v:10:y:1998:i:1:p:129-146
    DOI: 10.1002/(SICI)1099-1328(199801)10:1<129::AID-JID505>3.0.CO;2-9
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    References listed on IDEAS

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    1. Sargent, Thomas J, 1976. "A Classical Macroeconometric Model for the United States," Journal of Political Economy, University of Chicago Press, vol. 84(2), pages 207-237, April.
    2. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    3. Granger, C. W. J., 1981. "Some properties of time series data and their use in econometric model specification," Journal of Econometrics, Elsevier, vol. 16(1), pages 121-130, May.
    4. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    5. Guilkey, David K & Salemi, Michael K, 1982. "Small Sample Properties of Three Tests for Granger-Causal Ordering in a Bivariate Stochastic System," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 668-680, November.
    6. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    7. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March.
    8. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
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    Cited by:

    1. Kanwar, Sunil, 1998. "Wage responsiveness of labour supply and demand in nonclearing rural markets: the case of Indian agriculture," Economics Letters, Elsevier, vol. 61(3), pages 395-402, December.
    2. Sunil Kanwar, 1999. "Does risk matter? The case of wage-labour allocation by owner-cultivators," Applied Economics, Taylor & Francis Journals, vol. 31(3), pages 307-317.
    3. Damien Gaumont & Charbel Macdissi, 2012. "International Migration And Uncertainty:A Non-Factor Price Equalization Overlapping Generations Model," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(2), pages 151-177.

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