Sequential Labor Decisions under Uncertainty: An Estimable Household Model of West-African Farmers

Marcel Fafchamps

Econometrica, 1993, vol. 61, issue 5, 1173-97

Abstract: This paper reports estimates of the primitive parameters of a stochastic control model describing the labor decisions of West African small farmers. Maximum likelihood estimates are computed although optimal labor decision rules cannot be derived analytically. Vuong's non-nested model specification test shows that this method yields estimates superior to those derived by assuming that farmers solve a deterministic control problem. Low levels of labor effort are shown to be a consequence of low labor productivity in archaic rain-fed agriculture and of farmers' awareness that, in the absence of a labor market, overly ambitious production plans lead to seasonal manpower shortages. Copyright 1993 by The Econometric Society.

Date: 1993
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