Testing for Separability in Household Models with Heterogeneous Behavior: A Mixture Model Approach
Knowing whether a household behaves according to separability or non-separability is needed for the correct modeling of production decisions. We propose a superior test to those found in the literature on separability by using a mixture distribution approach to estimate the probability that a farm household behaves according to non-separability, and test that the determinants of consumption affect production decisions for households categorized as non-separable. With non-separability attributed to labor market constraints, the switcher equation shows that Peruvian farm households that are indigenous and young, with low levels of education, and lack of local employment opportunities are more likely to be constrained on the labor market.
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Staff Paper Series
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- MICHAEL R. CARTER & Pedro Olinto, 2000. "Getting Institutions 'Right' for Whom: Credit Constraints and the Impact of Property Rights on the Quantity and Compostiton of Investment," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 433, Wisconsin-Madison Agricultural and Applied Economics Department.
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