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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, Ethiopia.
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f0010: Kernel regression, total labor demand on household size, Ethiopia.

Mentions: Fig. 2 shows a kernel regression of total labor demand (family labor plus hired labor, in adult person-days) on total household size, again for households in Ethiopia. If labor markets were complete and competitive and the separation hypothesis held, we would expect to see no clear relationship between these two variables. Instead we see that total labor demand is increasing in the number of household members until a household size of 7, after which the regression line tapers off and becomes noisier. Although this figure does not constitute a formal separation test, because the underlying result does not condition on important covariates, it does suggest that there exists a strong relationship between household labor endowments and the application of labor on the family farm.


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

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

f0010: Kernel regression, total labor demand on household size, Ethiopia.
Mentions: Fig. 2 shows a kernel regression of total labor demand (family labor plus hired labor, in adult person-days) on total household size, again for households in Ethiopia. If labor markets were complete and competitive and the separation hypothesis held, we would expect to see no clear relationship between these two variables. Instead we see that total labor demand is increasing in the number of household members until a household size of 7, after which the regression line tapers off and becomes noisier. Although this figure does not constitute a formal separation test, because the underlying result does not condition on important covariates, it does suggest that there exists a strong relationship between household labor endowments and the application of labor on the family farm.

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