Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models

Complete and competitive markets imply a separation of the consumption (labor supply) and production (labor demand) decisions of the farm household. This paper tests for separation using the observation that in the absence of labor markets, household composition is an important determinant of farm l...

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Bibliographic Details
Published in:Econometrica 1992-03, Vol.60 (2), p.287-322
Main Author: Benjamin, Dwayne
Format: Article
Language:English
Subjects:
Agricultural land
Agriculture
Comparative studies
Consumption
Crops
Demography
Economic models
Economic statistics
Economic theory
Elasticity of demand
Employment
Farming
Farms
Farmworkers
Household utilities
Households
Hypotheses
Labor
Labor demand
Labor economics
Labor market
Labor markets
Labor supply
Labour demand
Labour market
Regression analysis
Social research
Supply & demand
Utility functions
Variables
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Summary:Complete and competitive markets imply a separation of the consumption (labor supply) and production (labor demand) decisions of the farm household. This paper tests for separation using the observation that in the absence of labor markets, household composition is an important determinant of farm labor use. The test has power when off-farm employment or hiring constraints, or differing efficiencies of family and hired labor lead to demographic variables affecting farm labor demand. An empirical model is developed to test the proposition that household labor demand (farm employment) is independent of family composition. The model is estimated on a household-farm data set from rural Java. Measurement error and endogeneity issues are addressed with instrumental variables techniques. I cannot reject the null hypothesis that farm labor allocation decisions are independent of household structure. The results are robust to different specifications of the labor demand function.
ISSN:0012-9682
1468-0262
DOI:10.2307/2951598