Shadow Wages, Allocative Inefficiency, and Labor Supply in Smallholder Agriculture

Cornell University Applied Economics Working Paper

32 Pages Posted: 17 Feb 2001

See all articles by Christopher B. Barrett

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Shane M. Sherlund

Federal Reserve Board of Governors

Akinwumi A. Adesina

The Rockefeller Foundation

Multiple version iconThere are 2 versions of this paper

Date Written: March 2005

Abstract

This paper introduces a method for estimating structural labor supply models in the presence of unobservable wages and deviations of households' marginal revenue product of self-employed labor from their shadow wage. This method is therefore remarkably robust to a wide range of assumptions about labor allocation decisions in the presence of uncertainty, market frictions, locational preferences, etc. Data from rice producers in Cote d'Ivoire reveal significant, systematic differences between shadow wages and the marginal revenue product of family farm labor, deviations strongly related to household characteristics, particularly land/labor endowment ratio. Adjustments for estimated allocative inefficiency lead to more plausible and precise parameter estimates of the structural household labor supply equation.

JEL Classification: O1, J0, C3, Q1

Suggested Citation

Barrett, Christopher B. and Sherlund, Shane M. and Adesina, Akinwumi A., Shadow Wages, Allocative Inefficiency, and Labor Supply in Smallholder Agriculture (March 2005). Cornell University Applied Economics Working Paper. Available at SSRN: https://ssrn.com/abstract=257330 or http://dx.doi.org/10.2139/ssrn.257330

Christopher B. Barrett (Contact Author)

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
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607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

Shane M. Sherlund

Federal Reserve Board of Governors ( email )

20th and C Streets, NW
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Washington, DC 20551
United States
202-452-3589 (Phone)
202-728-5887 (Fax)

Akinwumi A. Adesina

The Rockefeller Foundation ( email )

420 Fifth Avenue
New York, NY 10018-2702
United States

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