1st Edition

Modelling the Efficiency of Family and Hired Labour Illustrations from Nepalese Agriculture

By Prem Jung Thapa Copyright 2003

    This title was first published in 2003.The principal economic units in most developing countries are family based farm households. Empirical models that recognize the dual role of the farm household as producer and consumer in a theoretically consistent manner are essential tools for policy analyses. This book provides an important extension of the conventional farm household model by developing an analytical framework that allows for efficiency differences between family and hired labour as inputs in farm production. The model is estimated with survey data from the southern lowland region of Nepal. The estimation strategy is a two-step process. The first step estimates a farm-level production function in which is embedded a test for heterogeneity between family and hired labour. The labour heterogeneity detected in the production function estimation is incorporated, at the second step, in the labour supply estimation in a theoretically consistent manner. The methodological novelty is to relate the shadow wage rate for family labour to the observed market wage rate for hired labour, adjusted for the differential productivity of family and hired labour detected in the production function estimation.

    Contents: Introduction: Motivation; The research question; Estimation methodology; The setting; Chapter outline. Background and Literature Review: Background issues; Literature review; Summary. A Farm Household Model with Heterogeneous Labour Inputs: Introduction; Analytical structure of a model with heterogeneous labour; Aggregating labour inputs and production function separability; A farm household model with heterogeneous composite labour; Labour supply implications of heterogeneity; Summary. Estimation Strategy: General issues; The two step estimation strategy for a non-recursive model; A two step estimation strategy with heterogeneous labour; Error correction for the two step estimator; Summary. The Setting and The Data: The setting; The data set; Main variable definitions; Summary. Production Function Estimation Results and Tests for Labour Heterogeneity: Introduction; Data summary; Estimation and inference for farms using both family and hired labour; Testing for alternative aggregates of family and hired labour; Complete results for the linear composite labour model; Sensitivity analysis; Elasticities of substitution with a linear labour composite; Summary; Appendix 6: The translog specification with family and hired labour as independent inputs. Labour Supply Estimation Results: Introduction and motivation; Labour supply implications of linear heterogeneity; Data summary; Model specification and identification; Labour supply regression results: male family members; Labour supply regression results: female family members; Summary; Appendix 7: Complete labour supply regression results for selected model specifications. Summary and Conclusions: Overview; Summary of analytical results; Some implications; Suggestions for further research; Bibliography; Index.


    Prem Jung Thapa, Dr, Research School of Social Sciences, The Australian National University, Canberra, Australia.

    ’This book makes an important contribution to the economics of rural labour markets in developing countries. Its findings have implications for a range of policy issues, including the effects of land reform.’ Professor Peter Warr, Australian National University, Australia ’Scholars interested in issues of family-based agriculture and agricultural development in Nepal and other developing countries will find this book stimulating and useful. The author makes an important contribution to the emerging literature on farm household decision making in traditional agriculture.’ Professor Anil Deolalikar, University of Washington, USA. '...Dr. Thapa's book breaks new analytical and empirical ground by providing an analytical foundation for such differences and tracing their implications for farm production and labour supply. This book should be mandatory reading for all interested in agricultural development in LDCs.' Professor Raghbendra Jha, Australian National University, Australia '...Dr Thapa's study enriches the empirically based literature in the agricultural economics of developing economies and will be welcomed everywhere by researchers and policy advisers concerned with development.' Professor Alan A. Powell, Monash University, Australia