Structural adjustment and market imperfections: a stylized village economy-wide model with non-separable farm households

Stein T. Holden (), J. Edward Taylor and Stephen Hampton

Environment and Development Economics, 1999, vol. 4, issue 01, pages 69-87

Abstract: Village economies and peasant households represent the main link between the economy and the environment in sub-Saharan Africa. The links from the macro level and down to the household level and further to the natural resource base are complex. It may therefore be difficult to predict the impact of macro policies and external shocks on the environment. This paper presents a typology of village economies and village economy-wide models. The framework is applied to a special case where a model is proposed and estimated to examine the impacts of external shocks, including structural adjustment policies, on cash-crop production and chitemene (shifting cultivation) in a remote Zambian village characterized by a missing (or negligible) labour market, input supply constraints, and credit rationing. Our findings indicate that structural adjustment policies, by decreasing the profitability of maize production, may encourage households to increase their chitemene production, resulting in more rapid deforestation.

Date: 1999
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