The effect of input-trade liberalization on nonfarm and farm labour participation in rural Vietnam

Hoang Xuan Trung and Luca Tiberti

Working Papers PMMA from PEP-PMMA

Abstract: This paper examines the impact of the trade liberalization of chemical fertilisers on the allocation of labour between nonfarm and farm sectors in rural Vietnam during the period 1993-1998. To do that, we use a panel dataset controlling for fixed effects and instrumenting the volume of chemical fertilisers and the exogenous change in fertilisers’ prices is exploited. The study shows that a higher volume of chemical fertilisers reduces the employment of rural households in the nonfarm sector and increases labour participation in farm activities. A larger use of chemical fertilisers would also generate other complementary effects such as a higher demand for organic fertilisers, increased on-farm hired labour, a bigger cultivated area with chemical fertilisers and a larger number of crops grown with chemical fertilisers. Also, we find that a larger use of chemical fertilisers creates larger incentives for on-farm family labour for small landholders compared to those with larger agricultural land, and that the magnitude of the effects is relatively larger for new farmers.

Keywords: instrumental variable; chemical fertiliser price; nonfarm activity; rural Vietnam. (search for similar items in EconPapers)
JEL-codes: F16 H31 J01 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-agr, nep-int, nep-sea and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:lvl:pmmacr:2016-11

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