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Agricultural factor markets in Sub-Saharan Africa: An updated view with formal tests for market failure

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ABSTRACT

This paper uses the recently collected Living Standard Measurement Study–Integrated Surveys on Agriculture Initiative data sets from five countries in Sub-Saharan Africa to provide a comprehensive overview of factor market participation by agrarian households and to formally test for failures in rural markets. Under complete and competitive markets, households can solve their consumption and production problems separately, so that household factor endowments do not predict input demand. This paper implements a simple, theoretically grounded test of this separation hypothesis, which can be interpreted as a reduced form test of market failure. In all five study countries, the analysis finds strong evidence of factor market failure. Moreover, those failures appear general and structural, not specific to subpopulations defined by gender, geography, human capital, or land quality. However, we show that rural markets are not generally missing in an absolute sense, suggesting that market existence is less of a problem than market function.

No MeSH data available.


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Kernel regression, total labor demand on household size, Uganda.
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f0050: Kernel regression, total labor demand on household size, Uganda.

Mentions: Fig. 3, Fig. 4, Fig. 5, Fig. 6, Fig. 7, Fig. 8, Fig. 9, Fig. 10 show similar pairs of kernel regression results for Malawi, Niger, Tanzania, and Uganda, respectively. The general patterns in Fig. 3, Fig. 7, Fig. 9 are consistent with that from Fig. 1 for Ethiopia: hiring of outside workers is increasing in the number of acres per household member, but at a decreasing marginal rate. In Fig. 5, however, we see no such pattern for households in Niger, particularly in the region over which most of the data are concentrated, i.e., below eight acres per person. Instead, the number of person-days demanded from outside workers is flat or even slightly decreasing in the household land:labor endowment ratio. One interpretation of this result, in combination with the observation that households in Niger rent significantly more land than those in other study countries, is that credit-constrained households borrow against expected harvest output to rent land, but that such loans cannot be converted into cash to hire workers.


Agricultural factor markets in Sub-Saharan Africa: An updated view with formal tests for market failure
Kernel regression, total labor demand on household size, Uganda.
© Copyright Policy - CC BY
Related In: Results  -  Collection

License
Show All Figures
getmorefigures.php?uid=PMC5384445&req=5

f0050: Kernel regression, total labor demand on household size, Uganda.
Mentions: Fig. 3, Fig. 4, Fig. 5, Fig. 6, Fig. 7, Fig. 8, Fig. 9, Fig. 10 show similar pairs of kernel regression results for Malawi, Niger, Tanzania, and Uganda, respectively. The general patterns in Fig. 3, Fig. 7, Fig. 9 are consistent with that from Fig. 1 for Ethiopia: hiring of outside workers is increasing in the number of acres per household member, but at a decreasing marginal rate. In Fig. 5, however, we see no such pattern for households in Niger, particularly in the region over which most of the data are concentrated, i.e., below eight acres per person. Instead, the number of person-days demanded from outside workers is flat or even slightly decreasing in the household land:labor endowment ratio. One interpretation of this result, in combination with the observation that households in Niger rent significantly more land than those in other study countries, is that credit-constrained households borrow against expected harvest output to rent land, but that such loans cannot be converted into cash to hire workers.

View Article: PubMed Central - PubMed

ABSTRACT

This paper uses the recently collected Living Standard Measurement Study–Integrated Surveys on Agriculture Initiative data sets from five countries in Sub-Saharan Africa to provide a comprehensive overview of factor market participation by agrarian households and to formally test for failures in rural markets. Under complete and competitive markets, households can solve their consumption and production problems separately, so that household factor endowments do not predict input demand. This paper implements a simple, theoretically grounded test of this separation hypothesis, which can be interpreted as a reduced form test of market failure. In all five study countries, the analysis finds strong evidence of factor market failure. Moreover, those failures appear general and structural, not specific to subpopulations defined by gender, geography, human capital, or land quality. However, we show that rural markets are not generally missing in an absolute sense, suggesting that market existence is less of a problem than market function.

No MeSH data available.


Related in: MedlinePlus