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The Effects of Transactions Costs on Labor Market Participation and Earnings: Evidence from Rural Philippine Markets


  • Leonardo A. Lanzona
  • Robert E. Evenson

    () (Economic Growth Center, Yale University)


The paper aims to measure transaction costs and its effects on labor market participation and on wage earnings. The observed differences between between buying and selling prices of rice across households are used to calculate transaction costs indices for villages which are incorporated into the standard labor market participation and Mincer wage equations. The estimates indicate that transaction costs may be a source of the income differentials between (a) the landed and the landless, (b) the rural and the urban areas, and (c) the males and the females. Furthermore, biases can noted in the regression coefficients of estimates that do not control for transaction costs.

Suggested Citation

  • Leonardo A. Lanzona & Robert E. Evenson, 1997. "The Effects of Transactions Costs on Labor Market Participation and Earnings: Evidence from Rural Philippine Markets," Working Papers 790, Economic Growth Center, Yale University.
  • Handle: RePEc:egc:wpaper:790

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    References listed on IDEAS

    1. Willis, Robert J., 1987. "Wage determinants: A survey and reinterpretation of human capital earnings functions," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 10, pages 525-602 Elsevier.
    2. Mark R. Rosenzweig & Kenneth I. Wolpin, 1985. "Specific Experience, Household Structure, and Intergenerational Transfers: Farm Family Land and Labor Arrangements in Developing Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 100(Supplemen), pages 961-987.
    3. Evenson, Robert & Roumasset, James, 1986. "MARKETS, institutions and family size in rural Philippine households," MPRA Paper 13227, University Library of Munich, Germany.
    4. Jacoby, H.G., 1990. "Shadow Wages And Peasant Family Labor Supply; An Econometric Application To The Peruvian Sierra," Papers 73, World Bank - Living Standards Measurement.
    5. Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Two-Tier Labor Markets in Agrarian Economies," American Economic Review, American Economic Association, vol. 75(1), pages 162-177, March.
    6. Otsuka, Keijiro & Hayami, Yujiro, 1988. "Theories of Share Tenancy: A Critical Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 37(1), pages 31-68, October.
    7. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
    8. Lanzona, Leonardo A., 1998. "Migration, self-selection and earnings in Philippine rural communities," Journal of Development Economics, Elsevier, vol. 56(1), pages 27-50, June.
    9. repec:phd:pjdevt:jpd_1986_vol._xiii_nos._1&2-f is not listed on IDEAS
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    Cited by:

    1. Evenson, Robert E. & Kimhi, Ayal & Desilva, Sanjaya, 2000. "Supervision And Transaction Costs: Evidence From Rice Farms In Bicol, The Philippines," 2000 Annual meeting, July 30-August 2, Tampa, FL 21788, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).


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