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Families, Insurance and Employment in Developing Agricultural Economies

Listed author(s):
  • St-Amour, Pascal


  • Vencatachellum, Desire

This paper studies the impact of families on sectoral labor allocation in developing agricultural economies. In an overlapping generations framework, we equate a family to a contingent-claims contract. Families are endogenous by design. A risk-averse adult facing possible unemployment may be insured by a less risk-averse elder. Similarly, a risk-averse elder may purchase crop failure insurance from a less risk-averse adult. The family is the unique provider of insurance services yielding positive expected insurance rent. A monopsonist landlord extracts this expected rent through state-contingent tenancy contracts. When unemployment insurance contracts are expensive to enforce, families do not exist if the adult is weakly risk-averse and unemployment risk is too high or too low This `family switching' property is internalized by the landlord, such that family organization alters the relative price of unskilled laborers, paid a fixed wage, and skilled sharecroppers to whom contingent tenancy contracts are offered. Our results indicate that families affect total employment and can yield multiple steady- state equilibria.

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Paper provided by Université Laval - Département d'économique in its series Cahiers de recherche with number 9703.

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Date of creation: 1997
Handle: RePEc:lvl:laeccr:9703
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