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A Test of Separability of Consumption and Production Decisions of Farm Households in Ethiopia

  • Christophe Muller


    ( Aix-Marseille University (Aix-Marseille School of Economics), CNRS & EHESS)

In this paper, we test and reject the separability of production and consumption decisions of agricultural households in Ethiopia, using data from a rural household survey conducted in 1994 and an estimated labour demand equation. We also elicit socio-demographic and asset variables that are positively linked with agricultural labour demands. These results reflect the limited development of fully organised labour markets in rural Ethiopia. They also imply that purely market-driven agricultural policies, e.g., price subsidies or taxes, may have only limited or perverse impacts, and should be complemented by policies directly affecting household decisions, such as food aid, technology transfer, free supply of fertilizers, etc.

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Paper provided by Aix-Marseille School of Economics, Marseille, France in its series AMSE Working Papers with number 1418.

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Length: 22 pages
Date of creation: May 2014
Date of revision: May 2014
Handle: RePEc:aim:wpaimx:1418
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  1. Michael Kevane, 1996. "Agrarian Structure and Agricultural Practice: Typology and Application to Western Sudan," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(1), pages 236-245.
  2. Vakis, Renos & Sadoulet, Elisabeth & de Janvry, Alain & Cafiero, Carlo, 2004. "Testing for separability in household models with heterogeneous behavior : a mixture model approach," CUDARE Working Paper Series 0990, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  3. Fafchamps, Marcel & Quisumbing, Agnes R., 1998. "Human capital, productivity, and labor allocation in rural Pakistan," FCND discussion papers 48, International Food Policy Research Institute (IFPRI).
  4. Stefan Dercon & Luc Christiaensen, 2008. "Consumption risk, technology adoption and poverty traps: evidence from Ethiopia," WEF Working Papers 0035, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
  5. Jere Behrman & Mark Rosenzweig & Andrew D. Foster, . "The Dynamics of Agricultural Production and the Calorie-Income Relationship: Evidence from Pakistan," Home Pages _069, University of Pennsylvania.
  6. Mani, Subha & Hoddinott, John & Strauss, John, 2012. "Long-term impact of investments in early schooling — Empirical evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 99(2), pages 292-299.
  7. Benjamin, Dwayne, 1992. "Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models," Econometrica, Econometric Society, vol. 60(2), pages 287-322, March.
  8. Lopez, Ramon E., 1984. "Estimating labor supply and production decisions of self-employed farm producers," European Economic Review, Elsevier, vol. 24(1), pages 61-82.
  9. Barrett, Christopher B., 1996. "On price risk and the inverse farm size-productivity relationship," Journal of Development Economics, Elsevier, vol. 51(2), pages 193-215, December.
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