Human capital, entrepreneurship, and farm household earnings

The allocation of resources between agriculture and non-agriculture is a central decision of the farm household. In this paper, we formulate a profit-maximization model in which human capital enhances efficiency through both within-sector effects and across-sector allocation of quasi-fixed inputs. T...

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Bibliographic Details
Published in:Journal of development economics 2002-06, Vol.68 (1), p.65-88
Main Authors: Yang, Dennis Tao, An, Mark Yuying
Format: Article
Language:English
Subjects:
China
Comparative studies
Development economics
Development studies
Earnings
Economic models
Economic theory
Entrepreneurship
Factor allocation
Farm vs. non-farm earnings
Farms
Household income
Households
Human capital
Profit function
Profits
Regression analysis
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Summary:The allocation of resources between agriculture and non-agriculture is a central decision of the farm household. In this paper, we formulate a profit-maximization model in which human capital enhances efficiency through both within-sector effects and across-sector allocation of quasi-fixed inputs. The model is estimated using Chinese household data that contain detailed information on production activities. We find that schooling and experience improve the sectoral uses of household-supplied inputs, accounting for 27% of their total contribution to earnings. The evidence suggests that conventional estimates of human capital returns obtained within sectors would undervalue the role of human capital in development.
ISSN:0304-3878
1872-6089
DOI:10.1016/S0304-3878(02)00006-8